Contents
Chapter 1—Introduction and core provisions
Part 1‑1—Preliminary
Division 1—Preliminary
1‑1 Short title
1‑5 Commencement
1‑7 Administration of this Act
1‑10 Definitions and rules for interpreting this Act
Part 1‑3—Core Provisions
Division 4—How to work out the income tax payable on your taxable income
4‑1 Application of the Income Tax Assessment Act 1997
4‑11 Temporary budget repair levy
Division 5—How to work out when to pay your income tax
Subdivision 5‑A—How to work out when to pay your income tax
5‑5 Application of Division 5 of the Income Tax Assessment Act 1997
5‑7 References in tax sharing agreements to former section 204
5‑10 General interest charge liabilities under former subsection 204(3)
5‑15 Application of section 5‑15 of the Income Tax Assessment Act 1997
Division 6—Assessable income and exempt income
6‑2 Effect of this Division
6‑3 Assessable income for income years before 1997‑98
6‑20 Exempt income for income years before 1997‑98
Division 8—Deductions
8‑2 Effect of this Division
8‑3 Deductions for income years before 1997‑98
8‑10 No double deductions for income year before 1997‑98 and income year after 1996‑97
Chapter 2—Liability rules of general application
Part 2‑1—Assessable income
Division 15—Some items of assessable income
15‑1 General application provision
15‑10 Application of section 15‑10 of the Income Tax Assessment Act 1997 to bounties and subsidies
15‑15 Application of section 15‑15 of the Income Tax Assessment Act 1997 to profit‑making undertaking or plan
15‑20 Application of section 15‑20 of the Income Tax Assessment Act 1997 to royalties
15‑30 Application of section 15‑30 of the Income Tax Assessment Act 1997 to insurance or indemnity payments
15‑35 Application of section 15‑35 of the Income Tax Assessment Act 1997 to interest on overpayments and early payments of tax
Division 20—Items included to reverse the effect of past deductions
Subdivision 20‑A—Insurance, indemnity or recoupment for deductible expenses
20‑1 Application of Subdivision 20‑A of the Income Tax Assessment Act 1997
Subdivision 20‑B—Disposal of a car for which lease payments have been deducted
20‑100 Application of Subdivision 20‑B of the Income Tax Assessment Act 1997
20‑105 The cost of a car acquired in the 1996‑97 income year or an earlier income year
20‑110 The termination value of a car disposed of in the 1996‑97 income year or an earlier income year
20‑115 Reducing the assessable amount for the disposal of a car in the 1997‑98 income year or later if there has been an earlier disposal of it
Part 2‑5—Rules about deductibility of particular kinds of amounts
Division 25—Some amounts you can deduct
25‑1 Application of Division 25 of the Income Tax Assessment Act 1997
25‑40 Application of section 25‑40 of the Income Tax Assessment Act 1997
25‑45 Application of section 25‑45 of the Income Tax Assessment Act 1997
25‑50 Application of section 25‑90 of the Income Tax Assessment Act 1997
25‑65 Local government election expenses
Division 26—Some amounts you cannot deduct, or cannot deduct in full
26‑1 Application of Division 26 of the Income Tax Assessment Act 1997
26‑30 Application of section 26‑30 of the Income Tax Assessment Act 1997
Division 30—Gifts or contributions
30‑1 Application of Division 30 of the Income Tax Assessment Act 1997
30‑5 Keeping in force old declarations and instruments
30‑25 Keeping in force the old gifts registers
30‑102 Fund, authorities and institutions taken to be endorsed
Division 32—Entertainment expenses
32‑1 Application of Division 32 of the Income Tax Assessment Act 1997
Division 34—Non‑compulsory uniforms
34‑1 Application of Division 34 of the Income Tax Assessment Act 1997
34‑5 Things done under former section 51AL of the Income Tax Assessment Act 1936
Division 35—Deferral of losses from non‑commercial business activities
35‑10 Deductions for certain new business investment
35‑20 Application of Commissioner’s decisions
Division 36—Tax losses of earlier income years
36‑100 Tax losses for the 1997‑98 and later income years
36‑105 Tax losses for 1989‑90 to 1996‑97 income years
36‑110 Tax losses for 1957‑58 to 1988‑89 income years
Part 2‑10—Capital allowances: rules about deductibility of capital expenditure
Division 40—Capital allowances
Subdivision 40‑B—Core provisions
40‑10 Plant
40‑12 Plant acquired after 30 June 2001
40‑13 Accelerated depreciation for split or merged plant
40‑15 Recalculating effective life
40‑20 IRUs
40‑25 Software
40‑30 Spectrum licences
40‑33 Datacasting transmitter licences
40‑35 Mining unrecouped expenditure
40‑37 Post‑30 June 2001 mining expenditure
40‑38 Mining cash bidding payments
40‑40 Transport expenditure
40‑43 Post‑30 June 2001 transport expenditure
40‑44 No additional decline in certain cases
40‑45 Intellectual property
40‑47 IRUs
40‑50 Forestry roads and timber mill buildings
40‑55 Environmental impact assessment
40‑60 Pooling under Subdivision 42‑L of the former Act
40‑65 Substituted accounting periods
40‑67 Methods for working out decline in value
40‑70 References to amounts deducted and reductions in deductions
40‑72 New diminishing value method not to apply in some cases
40‑75 Mining expenditure incurred after 1 July 2001 on an asset
40‑77 Mining, quarrying or prospecting rights or information held before 1 July 2001
40‑80 Other expenditure incurred after 1 July 2001 on a depreciating asset
40‑100 Commissioner’s determination of effective life
40‑105 Calculations of effective life
Subdivision 40‑BA—Backing business investment
40‑120 Backing business investment—accelerated decline in value for businesses with turnover less than $500 million
40‑125 Backing business investment—when an asset of yours qualifies
40‑130 Method for working out accelerated decline in value
40‑135 Division 40 of the Income Tax Assessment Act 1997 applies to later years
40‑137 Choice to not apply this Subdivision to an asset
Subdivision 40‑BB—Temporary full expensing of depreciating assets
40‑140 Definitions
40‑145 Interaction with other provisions
40‑150 When an asset of yours qualifies for full expensing
40‑155 Businesses with turnover under $5 billion
40‑157 Corporate tax entities with income under $5 billion
40‑160 Full expensing of first and second element of cost for post‑2020 budget assets
40‑165 Exclusions—entities covered by section 40‑155 or 40‑157
40‑167 Exclusions—entities covered by section 40‑157
40‑170 Full expensing of eligible second element of cost
40‑175 When is an amount included in the eligible second element
40‑180 Division 40 of the Income Tax Assessment Act 1997 applies to later years
40‑185 Balancing adjustment for assets not used or located in Australia
40‑190 Choice to not apply this Subdivision to an asset for an income year
Subdivision 40‑C—Cost
40‑230 Car limit
Subdivision 40‑D—Balancing adjustments
40‑285 Balancing adjustments
40‑287 Disposal of pre‑1 July 2001 mining depreciating asset to associate
40‑288 Disposal of pre‑1 July 2001 mining non‑depreciating asset to associate
40‑289 Surrendered firearms
40‑290 Reduction of deductions under former Act etc.
40‑292 Balancing adjustment—assets used for both general tax purposes and R&D activities
40‑293 Balancing adjustment—partnership assets used for both general tax purposes and R&D activities
40‑295 Later year relief
40‑340 Roll‑overs
40‑345 Balancing adjustments for depreciating assets that retain CGT indexation
40‑365 Involuntary disposals
Subdivision 40‑E—Low‑value and software development pools
40‑420 Low‑value pools under Division 42 continue
40‑430 Allocating assets to low‑value pools
40‑450 Software development pools
Subdivision 40‑F—Primary production depreciating assets
40‑515 Water facilities, grapevines and horticultural plants
40‑520 Special rule for water facilities you no longer hold
40‑525 Amounts deducted for water facilities
Subdivision 40‑G—Capital expenditure of primary producers and other landholders
40‑645 Electricity supply and telephone lines
40‑650 Special rule for land that you no longer hold
40‑670 Farm consultants
Subdivision 40‑I—Capital expenditure that is deductible over time
40‑825 Genuine prospectors
40‑832 New method not to apply in some cases
Subdivision 40‑J—Ships depreciated under section 57AM of the Income Tax Assessment Act 1936
40‑840 Ships depreciated under section 57AM of the Income Tax Assessment Act 1936
Division 43—Deductions for capital works
43‑100 Application of Division 43 to quasi‑ownership rights over land
43‑105 Application of subsections 43‑50(1) and (2) to hotel buildings and apartment buildings
43‑110 Application of subsection 43‑75(3)
Division 45—Disposal of leases and leased plant
45‑1 Application of Division 45 of the Income Tax Assessment Act 1997
45‑3 Application of Division 45 to disposals between February 1999 and September 1999
45‑40 Application of Division to plant formerly owned by exempt entities
Part 2‑15—Non‑assessable income
Division 50—Exempt entities
50‑1 Application of Division 50 of the Income Tax Assessment Act 1997
50‑50 Charities established prior to 1 July 1997
Division 51—Exempt amounts
51‑1 Application of Division 51 of the Income Tax Assessment Act 1997
Division 52—Certain pensions, benefits and allowances are exempt from income tax
52‑1 Application of Division 52 of the Income Tax Assessment Act 1997
Division 53—Various exempt payments
53‑1 Application of Division 53 of the Income Tax Assessment Act 1997
Division 54—Exemption for certain payments made under structured settlements and structured orders
54‑1 Application of Division 54 of the Income Tax Assessment Act 1997
Division 55—Payments that are not exempt from income tax
55‑1 Application of Division 55 of the Income Tax Assessment Act 1997
Division 59—Particular amounts of non‑assessable non‑exempt income
Subdivision 59‑N—Native title benefits
59‑50 Indigenous holding entities
Part 2‑20—Tax offsets
Division 61—Generally applicable tax offsets
Subdivision 61‑L—Tax offset for Medicare levy surcharge (lump sum payments in arrears)
61‑575 Application of Subdivision 61‑L of the Income Tax Assessment Act 1997
Part 2‑25—Trading stock
Division 70—Trading stock
70‑1 Application of Division 70 of the Income Tax Assessment Act 1997
70‑10 Accounting for your disposal of items that stop being trading stock because of the change of definition
70‑20 Application of section 70‑20 of the Income Tax Assessment Act 1997 to trading stock bought on or after 1 July 1997
70‑55 Cost of live stock acquired by natural increase
70‑70 Valuing interests in FIFs on hand at the start of 1991‑92
70‑90 Application of sections 70‑90 and 70‑95 of the Income Tax Assessment Act 1997 to disposals of trading stock outside the ordinary course of business
70‑100 Application of section 70‑100 of the Income Tax Assessment Act 1997 to disposals of trading stock outside ordinary course of business
70‑105 Application of section 70‑105 of the Income Tax Assessment Act 1997 to deaths on or after 1 July 1997
70‑115 Application of section 70‑115 of the Income Tax Assessment Act 1997 to insurance and indemnity payments in 1997‑98 and later income years
Part 2‑40—Rules affecting employees and other taxpayers receiving PAYG withholding payments
Division 82—Pre‑10 May 2006 entitlements to life benefit termination payments
Subdivision 82‑A—Application of Division
82‑10 Pre‑10 May 2006 entitlements—transitional termination payments
Subdivision 82‑B—Transitional termination payments: general
82‑10A Recipient has reached preservation age
82‑10B Lower cap amount
82‑10C Recipient under preservation age
82‑10D Upper cap amount
Subdivision 82‑C—Pre‑payment statements
82‑10E Transitional termination payments—pre‑payment statements
Subdivision 82‑D—Directed termination payments made to superannuation and other entities
82‑10F Directed termination payments
82‑10G Directed termination payments not assessable income and not exempt income
Subdivision 82‑E—Pre‑10 May 2006 entitlements and employment termination payments made after 1 July 2012
82‑10H Transitional termination payments may reduce ETP cap amount for payments under section 82‑10 after 1 July 2012
Division 83A—Employee share schemes
Subdivision 83A‑A—Application of Division 83A of the Income Tax Assessment Act 1997
83A‑5 Application of Division 83A of the Income Tax Assessment Act 1997
Subdivision 83A‑B—Application of former provisions of the Income Tax Assessment Act 1936
83A‑10 Savings—continued operation of former provisions
83A‑15 Indeterminate rights
Chapter 3—Specialist liability rules
Part 3‑1—Capital gains and losses: general topics
Division 102—Application of Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997
102‑1 Application of Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997
102‑5 Working out capital gains and capital losses
102‑15 Applying net capital losses
102‑20 Net capital gains, capital gains and capital losses for income years before 1998‑99
102‑25 Transitional capital gains tax provisions for certain Cocos (Keeling) Islands and Norfolk Island assets
Division 104—CGT events
Subdivision 104‑C—End of a CGT asset
104‑25 Cancellation, surrender and similar endings
Subdivision 104‑D—Bringing into existence a CGT asset
104‑40 Granting an option
Subdivision 104‑E—Trusts
104‑70 Capital payment before 18 December 1986 for trust interest
Subdivision 104‑G—Shares
104‑135 Capital payment for shares
Subdivision 104‑I—Australian residency ends
104‑165 Choices made under subsection 104‑165(2) of the Income Tax Assessment Act 1997
104‑166 Subsection 104‑165(1) still applies if you continue to be a short term Australian resident
Subdivision 104‑J—CGT events relating to roll‑overs
104‑175 Company ceasing to be member of wholly‑owned group after roll‑over
104‑185 Change of status of replacement asset for a roll‑over under Division 17A of former Part IIIA of the 1936 Act or Division 123 of the 1997 Act
Subdivision 104‑K—Other CGT events
104‑205 Partial realisation of intellectual property
104‑235 CGT event K7: asset used for old law R&D activities
Division 108—CGT assets
Subdivision 108‑A—What a CGT asset is
108‑5 CGT assets
Subdivision 108‑B—Collectables
108‑15 Sets of collectables
Subdivision 108‑D—Separate CGT assets
108‑75 Capital improvements to CGT assets for which a roll‑over may be available
108‑85 Improvement threshold
Division 109—Acquisition of CGT assets
Subdivision 109‑A—Operative rules
109‑5 General acquisition rules
Division 110—Cost base and reduced cost base
Subdivision 110‑A—Cost base
110‑25 Cost base of CGT asset of life insurance company or registered organisation
110‑35 Incidental costs
Division 112—Modifications to cost base and reduced cost base
Subdivision 112‑A—General rules
112‑20 Market value substitution rule
Subdivision 112‑B—Special rules
112‑100 Effect of terminated gold mining exemptions
Division 114—Indexation of cost base
114‑5 When indexation relevant
Division 118—Exemptions
Subdivision 118‑A—General exemptions
118‑10 Interests in collectables
118‑24A Pilot plant
Subdivision 118‑B—Main residence
118‑110 Foreign residents
118‑195 Exemption—dwelling acquired from deceased estate
Subdivision 118‑C—Goodwill
118‑260 Business exemption threshold
Division 121—Record keeping
121‑15 Retaining records under Division 121
121‑25 Records for mergers between qualifying superannuation funds
Part 3‑3—Capital gains and losses: special topics
Division 124—Replacement‑asset roll‑overs
Subdivision 124‑C—Statutory licences
124‑140 New statutory licence—ASGE licence etc.
124‑141 ASGE licence etc.—cost base of ineligible part
124‑142 ASGE licence etc.—cost base of aquifer access licence etc.
Subdivision 124‑I—Change of incorporation
124‑510 Application of Subdivision 124‑I of the Income Tax Assessment Act 1997
Division 125—Demerger relief
Subdivision 125‑B—Consequences for owners of interests
125‑75 Employee share schemes
Division 126—Roll‑overs
Subdivision 126‑A—Merger of qualifying superannuation funds
126‑100 Merger of qualifying superannuation funds
Subdivision 126‑B—Transfer of life insurance business
126‑150 Roll‑over on transfer of life insurance business
126‑160 Effects of roll‑over
126‑165 References to Subdivision 126‑B of the Income Tax Assessment Act 1997
Division 128—Effect of death
128‑15 Effect on the legal personal representative or beneficiary
Division 130—Investments
Subdivision 130‑A—Bonus shares and units
130‑20 Issue of bonus shares or units
Subdivision 130‑B—Rights
130‑40 Exercise of rights
Subdivision 130‑C—Convertible notes
130‑60 Shares or units acquired by converting a convertible note
Division 134—Options
134‑1 Exercise of options
Division 136—Foreign residents
Subdivision 136‑A—Making a capital gain or loss
136‑25 When an asset is taxable Australian property
Division 137—Granny flat arrangements
Subdivision 137‑A—Granny flat arrangements
Operative provisions
137‑10 Applicable CGT events
Division 140—Share value shifting
Subdivision 140‑A—When is there share value shifting?
140‑7 Pre‑1994 share value shifts irrelevant
140‑15 Off‑market buy backs
Division 149—When an asset stops being a pre‑CGT asset
149‑5 Assets that stopped being pre‑CGT assets under old law
Division 152—Small business relief
152‑5 Small business roll‑over chosen but no capital gain returned
152‑10 Small business roll‑over not chosen and time remains to acquire a replacement asset
152‑15 Amendment of assessments
Part 3‑5—Corporate taxpayers and corporate distributions
Division 165—Income tax consequences of changing ownership or control of a company
Subdivision 165‑CA—Applying net capital losses of earlier income years
165‑95 Application of Subdivision 165‑CA of the Income Tax Assessment Act 1997
Subdivision 165‑CB—Working out the net capital gain and the net capital loss for the income year of the change
165‑105 Application of Subdivision 165‑CB of the Income Tax Assessment Act 1997
Subdivision 165‑CC—Change of ownership or control of company that has an unrealised net loss
165‑115E Choice to use global method to work out unrealised net loss
Subdivision 165‑CD—Reductions after alterations in ownership or control of loss company
165‑115U Choice to use global method to work out adjusted unrealised loss
165‑115ZC..............When certain notices to be given
165‑115ZDAdjustment (or further adjustment) for interest realised at a loss after global method has been used
Subdivision 165‑C—Deducting bad debts
165‑135 Application of Subdivision 165‑C of the Income Tax Assessment Act 1997
Division 166—Income tax consequences of changing ownership or control of a listed public company
Subdivision 166‑C—Deducting bad debts
166‑40 Application of Subdivision 166‑C of the Income Tax Assessment Act 1997
Division 167—Companies whose shares carry unequal rights to dividends, capital distributions or voting power
167‑1 Application of provisions
Division 170—Treatment of company groups for income tax purposes
Subdivision 170‑A—Transfer of tax losses within certain wholly‑owned groups of companies
170‑45 Special rules affecting utilisation of losses in a bundle do not affect the amount of a tax loss that can be transferred
170‑55 Ordering rule for losses previously transferred under Subdivision 707‑A of the Income Tax Assessment Act 1997
Subdivision 170‑B—Transfer of net capital losses within certain wholly‑owned groups of companies
170‑101 Application of Subdivision 170‑B of the Income Tax Assessment Act 1997
170‑145 Special rules affecting utilisation of losses in a bundle do not affect the amount of a net capital loss that can be transferred
170‑155 Ordering rule for losses previously transferred under Subdivision 707‑A of the Income Tax Assessment Act 1997
Subdivision 170‑C—Provisions applying to both transfers of tax losses and transfers of net capital losses within wholly‑owned groups of companies
170‑220 Direct and indirect interests in the loss company
170‑225 Direct and indirect interests in the gain company
Subdivision 170‑D—Transfer of life insurance business
170‑300 Transfer of life insurance business
Division 175—Use of a company’s losses, deductions or bad debts to avoid income tax
Subdivision 175‑CA—Tax benefits from unused net capital losses of earlier income years
175‑40 Application of Subdivision 175‑CA of the Income Tax Assessment Act 1997
Subdivision 175‑CB—Tax benefits from unused capital losses of the current year
175‑55 Application of Subdivision 175‑CB of the Income Tax Assessment Act 1997
Subdivision 175‑C—Tax benefits from unused bad debt deductions
175‑78 Application of Subdivision 175‑C of the Income Tax Assessment Act 1997
Division 197—Tainted share capital accounts
Subdivision 197‑A—Definitions
197‑1 Definitions
Subdivision 197‑B—General application provision
197‑5 Application of new Division 197
Subdivision 197‑C—Special provisions about companies whose share capital accounts were tainted when old Division 7B was closed off
197‑10 Subdivision applies to companies whose share capital accounts were tainted when old Division 7B was closed off
197‑15 Account taken to have ceased to be tainted when old Division 7B was closed off
197‑20 After introduction day, account taken to have become tainted under new Division 197 to extent of previous tainting
197‑25 Special provisions if company chooses to untaint after introduction day
Part 3‑6—The imputation system
Division 201—Object and application of Part 3‑6
201‑1 Estimated debits
Division 203—Benchmark rule
203‑1 Franking periods straddling 1 July 2002
Division 205—Franking accounts
205‑1 Order of events provision
205‑5 Washing estimated debits out of the franking account before conversion
205‑10 Converting the franking account balance to a tax paid basis—companies whose 2001‑02 franking year ends on 30 June 2002
205‑15 Converting the franking account balance to a tax paid basis—companies whose 2001‑02 franking year ends before 30 June 2002
205‑20 A late balancing company may elect to have its FDT liability determined on 30 June
205‑25 Franking deficit tax
205‑30 Deferring franking deficit
205‑35 No franking deficit tax if franking account in deficit at the close of the 2001‑02 income year of a late balancing entity
205‑70 Tax offset arising from franking deficit tax liabilities
205‑71 Modification of franking deficit tax offset rules
205‑75 Working out the tax offset for the first income year
205‑80 Application of Subdivision C of Division 5 of former Part IIIAA of the Income Tax Assessment Act 1936
Division 208—Exempting entities and former exempting entities
208‑111 Converting former exempting company’s exempting account balance on 30 June 2002
Division 210—Venture capital franking
210‑1 Order of events provision
210‑5 Washing estimated venture capital debits out of the old sub‑account before conversion
210‑10 Converting the venture capital sub‑account balance to a tax paid basis—PDFs whose 2001‑02 franking year ends on 30 June 2002
210‑15 Converting the venture capital sub‑account balance to a tax paid basis—PDFs whose 2001‑02 franking year ends before 30 June 2002
Division 214—Administering the imputation system
214‑1 Application
214‑5 Entity must give a franking return
214‑10 Notice to a specific corporate tax entity
214‑15 Effect of a refund on franking returns
214‑20 Franking returns for the income year
214‑25 Commissioner may make a franking assessment
214‑30 Commissioner taken to have made a franking assessment on first return
214‑35 Amendments within 3 years of the original assessment
214‑40 Amended assessments are treated as franking assessments
214‑45 Further return as a result of a refund affecting a franking deficit tax liability
214‑50 Later amendments—on request
214‑55 Later amendments—failure to make proper disclosure
214‑60 Later amendments—fraud or evasion
214‑65 Further amendment of an amended particular
214‑70 Other later amendments
214‑75 Amendment on review etc.
214‑80 Notice of amendments
214‑85 Validity of assessment
214‑90 Objections
214‑100 Due date for payment of franking tax
214‑105 General interest charge
214‑110 Refunds of amounts overpaid
214‑120 Record keeping
214‑125 Power of Commissioner to obtain information
214‑135 Interpretation
Division 219—Imputation for life insurance companies
219‑40 Reversing and replacing (on tax paid basis) certain franking credits that arose before 1 July 2002
219‑45 Reversing (on tax paid basis) certain franking debits that arose before 1 July 2002
Division 220—Imputation for NZ resident companies and related companies
220‑1 Application to things happening on or after 1 April 2003
220‑5 Residency requirement for income year including 1 April 2003
220‑10 NZ franking company cannot frank before 1 October 2003
220‑35 Extended time to make NZ franking choice
220‑501 Franking and exempting accounts of new former exempting entities
Part 3‑10—Financial transactions
Division 235—Particular financial transactions
Subdivision 235‑I—Instalment trusts
235‑810 Application of Subdivision 235‑I of the Income Tax Assessment Act 1997
Division 242—Leases of luxury cars
242‑10 Application
242‑20 Balancing adjustments
Division 245—Forgiveness of commercial debts
Subdivision 245‑A—Application of Division 245 of the Income Tax Assessment Act 1997
245‑5 Application and saving
245‑10 Pre‑28 June 1996 arrangements etc.
Division 247—Capital protected borrowings
Subdivision 247‑A—Interim apportionment methodology
247‑5 Interim apportionment methodology
247‑10 Products listed on the Australian Stock Exchange that have explicit put options
247‑15 Other capital protected products
247‑20 The indicator method
247‑25 The percentage method
Subdivision 247‑B—Other transitional provisions
247‑75 Post‑July 2007 capital protected borrowings
247‑80 Capital protected borrowings in existence on 1 July 2013
247‑85 Extensions and other changes
Division 253—Financial claims scheme for account‑holders with insolvent ADIs
Subdivision 253‑A—Tax treatment of entitlements under financial claims scheme
253‑5 Application of section 253‑5 of the Income Tax Assessment Act 1997
253‑10 Application of sections 253‑10 and 253‑15 of the Income Tax Assessment Act 1997
Part 3‑25—Particular kinds of trusts
Division 275—Australian managed investment trusts
Subdivision 275‑A—Choice for capital treatment of MIT gains and losses
275‑10 Consequences of making choice—Commissioner cannot make certain amendments to previous assessments
Subdivision 275‑L—Modification for non‑arm’s length income
275‑605 Trustee taxed on amount of non‑arm’s length income of managed investment trust—not applicable for pre‑introduction scheme where amount derived before start of 2018‑19 income year
Division 276—Attribution managed investment trusts
Subdivision 276‑A—Application
276‑5 Application of Division 276
Subdivision 276‑B—Starting income year
276‑25 Starting income year
Subdivision 276‑T—Becoming an AMIT: unders and overs
276‑700 Application of Subdivision to MIT that becomes AMIT
276‑705 Accounting for unders and overs for base years before becoming an AMIT
Subdivision 276‑U—Becoming an AMIT: CGT treatment of payment by trustee of AMIT
276‑750 Payment by trustee on or after 1 July 2011—certain CGT provisions etc. apply for the purposes of working out non‑assessable part for first income year of AMIT
276‑755 Payment by trustee before 1 July 2011—limit on amendment of assessment
Part 3‑30—Superannuation
Division 290—Contributions
290‑10 Directed termination payments not deductible etc.
290‑15 Early balancers—deduction limits from end of 2006‑2007 income year to 1 July 2007
Division 291—Excess concessional contributions
Subdivision 291‑A—Application of Division 291 of the Income Tax Assessment Act 1997
291‑10 Application of Division 291 of the Income Tax Assessment Act 1997
Subdivision 291‑C—Modifications for defined benefit interests
291‑170 Transitional rules for notional taxed contributions
Division 292—Excess non‑concessional contributions tax
292‑80 Application of excess non‑concessional contributions tax from 10 May 2006 to 1 July 2007
292‑80A Transitional release authority
292‑80B Giving a transitional release authority to a superannuation provider
292‑80C Superannuation provider given transitional release authority must pay amount
292‑85 Non‑concessional contributions cap for a financial year
292‑90 Non‑concessional contributions for a financial year
Division 293—Sustaining the superannuation contribution concession
Subdivision 293‑A—Application of Division 293 tax rules
293‑10 Application of Division 293 of the Income Tax Assessment Act 1997
Division 294—Transfer balance cap
Subdivision 294‑A—Application of Division 294 of the Income Tax Assessment Act 1997
294‑10 Application of Division 294 of the Income Tax Assessment Act 1997
294‑30 Minor excess transfer balances disregarded if remedied in first 6 months
294‑55 Repayment of limited recourse borrowing arrangements
294‑80 Structured settlement contributions made before 1 July 2017—debit increased to match credits
Subdivision 294‑B—CGT relief
294‑100 Object
294‑105 Interpretation
294‑110 Segregated current pension assets
294‑115 Superannuation funds using the proportionate method—deemed sale and purchase of CGT asset
294‑120 Superannuation funds using the proportionate method—disregard initial capital gain but recognise deferred notional gain
294‑125 Pooled superannuation trust using proportionate or alternative exemption method—deemed sale and purchase of CGT asset
294‑130 Pooled superannuation trusts using proportionate or alternative exemption method—disregard initial capital gain but recognise deferred notional gain
Division 295—Taxation of superannuation entities
Subdivision 295‑B—Modifications of the Income Tax Assessment Act 1997 for 30 June 1988 assets
295‑75 Application of Subdivision
295‑80 Meaning of 30 June 1988 asset
295‑85 Cost base of 30 June 1988 asset
295‑90 Market value of stock exchange listed assets
295‑95 Adjustment of cost base as at 30 June 1988—return of capital
295‑100 Exercise of rights
Subdivision 295‑C—Notices relating to contributions
295‑190 Deductions for personal contributions
Subdivision 295‑F—Exempt income
295‑390 Fixed interest complying ADFs—exemption of income attributable to certain 25 May 1988 deposits
Subdivision 295‑G—Deductions
295‑465 Complying funds—deductions for insurance premiums
Subdivision 295‑I—No‑TFN contributions income
295‑610 No‑TFN contributions income
Division 301—Superannuation member benefits paid from complying plans etc.
301‑5 Extended application to certain foreign superannuation funds
301‑85 Extended meaning of disability superannuation benefit for superannuation income stream
Division 302—Superannuation death benefits paid from complying plans etc.
302‑5 Extended application to certain foreign superannuation funds
302‑195 Extended meaning of death benefits dependant for superannuation income stream
302‑195A Meaning of death benefits dependant for 2008‑2009 income year
Division 303—Superannuation benefits paid in special circumstances
303‑10 Superannuation lump sum member benefit paid to member having a terminal medical condition
303‑15 Superannuation lump sum member benefit paid to member on compassionate ground relating to the coronavirus
Division 304—Superannuation benefits in breach of legislative requirements etc.
304‑15 Excess payments from release authorities
Division 305—Superannuation benefits paid from non‑complying superannuation plans
Subdivision 305‑B—Superannuation benefits from foreign superannuation funds
305‑80 Lump sums paid into complying superannuation plans post‑FIF abolition
Division 306—Roll‑overs etc.
306‑10 Roll‑over superannuation benefit—directed termination payment
Division 307—Key concepts relating to superannuation benefits
307‑125 Treatment of tax free component of existing pension payments etc.
307‑127 Extension—income stream replacing an earlier one because of an involuntary roll‑over
307‑230 Total superannuation balance—modification for transfer balance just before 1 July 2017
307‑231 Total superannuation balance—limited recourse borrowing arrangements
307‑290 Taxed and untaxed elements of death benefit superannuation lump sums
307‑345 Low rate component—Effect of rebate under the Income Tax Assessment Act 1936
Part 3‑32—Co‑operatives and mutual entities
Division 316—Demutualisation of friendly society health or life insurers
Subdivision 316‑A—Application
316‑1 Application of Division 316 of the Income Tax Assessment Act 1997
Part 3‑35—Insurance business
Division 320—Life insurance companies
Operative provisions
Subdivision 320‑A—Preliminary
320‑5 Life insurance companies that are friendly societies
Subdivision 320‑C—Deductions and capital losses
320‑85 Deduction for increase in value of liabilities under risk components of life insurance policies
Subdivision 320‑D—Taxable income and tax loss of life insurance companies
320‑100 Savings—tax losses of previous income years
Subdivision 320‑F—Virtual PST
320‑170 Transfer of part of an asset to a virtual PST
320‑175 Transfers of assets to virtual PST
320‑180 Deferred annuities purchased before 1 July 2007
Subdivision 320‑H—Segregation of assets for the purpose of discharging exempt life insurance policies
320‑225 Transfer of part of an asset to segregated exempt assets
320‑230 Transfers of assets to segregated exempt assets
Division 322—Assistance for policyholders with insolvent general insurers
Subdivision 322‑B—Tax treatment of entitlements under financial claims scheme
322‑25 Application of section 322‑25 of the Income Tax Assessment Act 1997
322‑30 Application of section 322‑30 of the Income Tax Assessment Act 1997
Part 3‑45—Rules for particular industries and occupations
Division 328—Small business entities
328‑1 Definitions
328‑110 Working out whether you are a small business entity for the 2007‑08 or 2008‑09 income year—turnover for earlier income years
328‑111 Access to certain small business concessions for former STS taxpayers that are winding up a business
328‑112 Working out whether you are a small business entity for certain small business concessions—entities connected with you
328‑115 When you stop using the STS accounting method
328‑120 Continuing to use the STS accounting method
328‑125 Meaning of STS accounting method
328‑175 Choices made in relation to depreciating assets used in primary production business
328‑180 Increased access to accelerated depreciation from 12 May 2015 to 30 June 2023
328‑181 Full expensing—2020 budget time to 30 June 2023
328‑182 Backing business investment
328‑185 Depreciating assets allocated to STS pools
328‑195 Opening pool balances for 2007‑08 income year
328‑200 General small business pool for the 2012‑13 income year
328‑440 Taxpayers who left the STS on or after 1 July 2005
Division 355—Research and Development
Subdivision 355‑D—Registration for activities before 2011‑12 income year
355‑200 Registration for activities before 2011‑12 income year
Subdivision 355‑E—Balancing adjustments for decline in value deductions for assets used in R&D activities
355‑320 Balancing adjustment—assets only used for R&D activities
355‑325 Balancing adjustment—R&D partnership assets only used for R&D activities
355‑340 Balancing adjustment—tax exempt entities that become taxable
Subdivision 355‑F—Integrity rules
355‑415 Expenditure reduced to reflect group mark‑ups
Subdivision 355‑K—Modified application of the old R&D law
355‑550 Prepayments of R&D expenditure extending into the 2011‑12 income year
Subdivision 355‑M—Undeducted core technology expenditure
355‑600 Scope
355‑605 Core technology that is a depreciating asset
355‑610 Core technology that is not a depreciating asset
Division 375—Australian films
Subdivision 375‑G—Film losses
375‑100 Film component of tax loss for 1997‑98 or later income year
375‑105 Film component of tax loss for 1989‑90 to 1996‑97 income years
375‑110 Film loss for 1989‑90 or later income year
Division 392—Long‑term averaging of primary producers’ tax liability
392‑1 Application of Division 392 of the Income Tax Assessment Act 1997
392‑25 Transitional provision—election under section 158A of the Income Tax Assessment Act 1936
Division 393—Farm management deposits
Subdivision 393‑A—Tax consequences of farm management deposits
393‑1 Application of Division 393 of the Income Tax Assessment Act 1997
393‑5 Unrecouped FMD deduction
393‑10 Unrecouped FMD deduction for deposits made as a result of section 25B of the Loan (Income Equalization Deposits) Act 1976
393‑27 Trustee may choose that a beneficiary is a chosen beneficiary of the trust
393‑30 Unclaimed moneys
Subdivision 393‑B—Meaning of farm management deposit and owner
393‑40 The day the deposit was made for deposits made as a result of section 25B of the Loan (Income Equalization Deposits) Act 1976
Division 410—Copyright collecting societies
410‑1 Application of section 51‑43 of the Income Tax Assessment Act 1997
Division 415—Designated infrastructure projects
Subdivision 415‑B—Application of Subdivision 415‑B of the Income Tax Assessment Act 1997
415‑10 Application of Subdivision 415‑B of the Income Tax Assessment Act 1997
Part 3‑50—Climate change
Division 420—Registered emissions units
Subdivision 420‑A—General application provision
420‑1 Application of Division 420 of the Income Tax Assessment Act 1997
Part 3‑80—Roll‑overs applying to assets generally
Division 615—Roll‑overs for business restructures
Subdivision 615‑A—Modifications for roll‑overs between the 2011 and 2012 Budget times
615‑5 Roll‑overs between the 2011 and 2012 Budget times
615‑10 Modifications—when additional consequences can apply
615‑15 Modifications—trading stock
615‑20 Modifications—revenue assets
Division 620—Assets of wound‑up corporation passing to corporation with not significantly different ownership
Subdivision 620‑A—Corporations covered by Subdivision 124‑I
620‑10 Application of Subdivision 620‑A of the Income Tax Assessment Act 1997
Part 3‑90—Consolidated groups
Division 700—Application of Part 3‑90 of Income Tax Assessment Act 1997
700‑1 Application of Part 3‑90 of Income Tax Assessment Act 1997
Division 701—Modified application of provisions of Income Tax Assessment Act 1997 for certain consolidated groups formed in 2002‑3 and 2003‑4 financial years
Subdivision 701‑A—Preliminary
701‑1 Transitional group and transitional entity
701‑5 Chosen transitional entity
701‑7 Working out the cost base or reduced cost base of a pre‑CGT asset after certain roll‑overs
701‑10 Interpretation
Subdivision 701‑B—Modified application of provisions
701‑15 Tax cost and trading stock value not set for assets of chosen transitional entities
701‑20 Working out allocable cost amount on formation for subsidiary members other than chosen transitional entities
701‑25 No operation of value shifting and loss transfer provisions to membership interests in chosen transitional entities
701‑32 No adjustment of amount of liabilities required in working out allocable cost amount
701‑35 Act, transaction or event giving rise to CGT event for pre‑formation roll‑over after 16 May 2002 to be disregarded if cost base etc. would be different
701‑40 When entity leaves transitional group, head company may choose, for purposes of transitional group’s allocable cost amount, to increase terminating values of over‑depreciated assets
701‑45 When entity leaves transitional group, head company may choose, for purposes of transitional group’s allocable cost amount, to use formation time market values, instead of terminating values, for certain pre‑CGT assets
701‑50 Increased allocable cost amount for leaving entity if it takes privatised asset brought into group by chosen transitional entity
Division 701A—Modified application of provisions of Income Tax Assessment Act 1997 for entities with continuing majority ownership from 27 June 2002 until joining a consolidated group
701A‑1 Continuing majority‑owned entity, designated group etc.
701A‑5 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to trading stock of continuing majority‑owned entity
701A‑7 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to registered emissions units of continuing majority‑owned entity
701A‑10 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to certain internally generated assets of continuing majority‑owned entity
Division 701B—Modified application of provisions of Income Tax Assessment Act 1997 relating to CGT event L1
701B‑1 Modified application of CGT Consolidation provisions to allow immediate availability of capital loss for CGT event L1
Division 701C—Modified application etc. of provisions of Income Tax Assessment Act 1997: transitional foreign‑held membership structures
Subdivision 701C‑A—Overview
701C‑1 Overview
Subdivision 701C‑B—Membership rules allowing foreign holding
701C‑10 Additional membership rules where entities are interposed between the head company and a subsidiary member—case where an interposed entity is a foreign resident and the subsidiary member is a company
701C‑15 Additional membership rules where entities are interposed between the head company and a subsidiary member—case where an interposed entity is a foreign resident and the subsidiary member is a trust or partnership
701C‑20 Transitional foreign‑held subsidiaries and transitional foreign‑held indirect subsidiaries
Subdivision 701C‑C—Modifications of tax cost setting rules
Application and object
701C‑25 Application and object of this Subdivision
Basic modification
701C‑30 Transitional foreign‑held subsidiary to be treated as part of head company
Other modifications
701C‑35 Trading stock value not set for assets of transitional foreign‑held subsidiaries
701C‑40 Cost setting rules for exit cases—modification of core rules
701C‑50 Cost setting rules for exit cases—reference to modification of core rule
Division 701D—Transitional foreign loss makers
Subdivision 701D‑A—Object of this Division
701D‑1 Object of this Division
Subdivision 701D‑B—Rules allowing transitional foreign loss makers to remain outside consolidated group
701D‑10 Transitional foreign loss maker not member of group if certain conditions satisfied
701D‑15 Choice to apply transitional rules to entity
Division 702—Modified application of this Act to assets that an entity brings into a consolidated group
702‑1 Modified application of section 40‑77 of this Act to assets that an entity brings into a consolidated group
702‑4 Extended operation of subsection 40‑285(3)
702‑5 Modified application of subsection 40‑285(6) of this Act after entity brings assets into consolidated group
Division 703—Consolidated groups and their members
703‑30 Debt interests that are not membership interests
703‑35 Employee share schemes
Division 705—Tax cost setting amount for assets where entities become members of consolidated groups
Subdivision 705‑E—Expenditure relating to exploration, mining or quarrying
705‑300 Application and object of this Subdivision
705‑305 Rules affecting depreciating assets
705‑310 Adjustable value of head company’s notional assets
Division 707—Losses for head companies when entities become members etc.
Subdivision 707‑A—Transfer of losses to head company
707‑145 Certain choices to cancel the transfer of a loss may be revoked
Subdivision 707‑C—Amount of transferred losses that can be utilised
707‑325 Increasing the available fraction for a bundle of losses by increasing the real loss‑maker’s modified market value
707‑326 Events involving only value donor and real loss‑maker not covered by rule against inflation of modified market value
707‑327 Choosing available fraction to apply to value donor’s loss
707‑328 Income year and conditions for possible transfer under Division 170 of the Income Tax Assessment Act 1997
707‑328A Some events involving only group members not covered by rule against inflation of modified market value
707‑329 Modified market value at a time before 8 December 2004
707‑350 Alternative loss utilisation regime to Subdivision 707‑C of the Income Tax Assessment Act 1997
707‑355 Ignore certain losses in working out when a choice can be made under this Subdivision
Subdivision 707‑D—Special rules about losses
707‑405 Special rules about losses referable to part of income year
Division 709—Other rules applying when entities become subsidiary members etc.
Subdivision 709‑D—Deducting bad debts
709‑200 Application of Subdivision 709‑D of the Income Tax Assessment Act 1997
Division 712—Certain rules for where entities cease to be subsidiary members of consolidated groups
Subdivision 712‑E—Expenditure relating to exploration, mining or quarrying
712‑305 Reducing adjustable value of head company’s notional asset
Division 713—Rules for particular kinds of entities
Subdivision 713‑L—Transitional relief for certain transactions relating to life insurance companies
713‑500 Object of Subdivision
713‑505 When this Subdivision applies (first case)
713‑510 When this Subdivision applies (second case)
713‑515 Entities must choose the relief
713‑520 Conditions
713‑525 Time of transfer
713‑530 What the relief is
713‑535 Subsequent consequences
713‑540 Requirement to notify happening of new event
713‑545 Discount capital gain in certain cases
Subdivision 713‑M—General insurance companies
713‑700 Application
Division 715—Interactions between the consolidation rules and other areas of the income tax law
Subdivision 715‑F—Interactions with Division 230 (financial arrangements)
715‑380 Exit history rule not to affect certain matters related to Division 230 financial arrangements
Subdivision 715‑J—Entry history rule and choices
715‑658 Application
715‑659 Extension of time for making choice if joining time was before commencement
Subdivision 715‑K—Exit history rule and choices
715‑698 Application
715‑699 Extension of time for making choice if leaving time was before commencement
Division 716—Miscellaneous special rules
Subdivision 716‑G—Software development pools
716‑340 Expenditure incurred before 1 July 2001 and allocated to a software pool
Division 719—MEC rules
Subdivision 719‑A—Modified application of Part 3‑90 to MEC groups
719‑2 Modified application of Part 3‑90 to MEC groups
Subdivision 719‑B—MEC groups and their members
719‑5 Debt interests that are not membership interests
719‑10 Effect of Division 701C
719‑15 Modified effect of subsection 701D‑10(2)
719‑30 Employee share schemes
Subdivision 719‑C—Cost setting
719‑160 Transitional cost setting rules on joining have effect with modifications
719‑161 Modified effect of section 701‑1
719‑163 Modified effect of section 701‑35
719‑165 Modified effect of paragraph 701‑45(1)(b)
Subdivision 719‑F—Losses
719‑305 Available fraction for bundle of losses not affected by concessional rules
719‑310 Certain choices may be revoked
Subdivision 719‑I—Bad debts
719‑450 Application of Subdivision 719‑I of the Income Tax Assessment Act 1997
Division 721—Liability for payment of tax where head company fails to pay on time
Subdivision 721‑A—Application of Division
721‑25 References in tax sharing agreements to former table item 25
Part 3‑95—Value shifting
Division 723—Direct value shifting by creating right over non‑depreciating asset
723‑1 Application of Division 723
Division 725—Direct value shifting affecting interests in companies and trusts
725‑1 Application of Division 725
Division 727—Indirect value shifting affecting interests in companies and trusts, and arising from non‑arm’s length dealings
727‑1 Application of Division 727
727‑230 Transitional exclusion for certain indirect value shifts relating mainly to services
727‑470 Affected interests do not include equity or loan interests owned by entity that is eligible to be an STS taxpayer
Chapter 4—International aspects of income tax
Part 4‑5—General
Division 815—Cross‑border transfer pricing
Subdivision 815‑A—Cross‑border transfer pricing
815‑1 Application of Subdivision 815‑A of the Income Tax Assessment Act 1997
815‑5 Cross‑border transfer pricing guidance
815‑10 Scheme penalty applies in pre‑commencement period as if only the old law applied
815‑15 Application of Subdivisions 815‑B, 815‑C and 815‑D of the Income Tax Assessment Act 1997
Division 820—Application of the thin capitalisation rules
820‑10 Application of Division 820 of the Income Tax Assessment Act 1997
820‑12 Application of Division 974 of the Income Tax Assessment Act 1997 for the purposes of Division 820 of that Act
820‑45 Transitional provision—accounting standards and prudential standards
Division 830—Application of the foreign hybrid rules
830‑1 Standard application
830‑15 Modified version of income tax law to apply for certain past income years
830‑20 Modifications of income tax law
Division 832—Hybrid mismatch rules
Subdivision 832‑A—Application of Division 832 of the Income Tax Assessment Act 1997
832‑10 Application of Division 832 of the Income Tax Assessment Act 1997 (other than imported hybrid mismatch rule)
832‑15 Application of imported hybrid mismatch rule
Division 840—Withholding taxes
Subdivision 840‑M—Managed investment trust amounts
840‑805 Managed investment trust amounts
840‑810 Payment of tax under section 840‑805
Subdivision 840‑S—Labour mobility program withholding tax
840‑905 Application of Subdivision 840‑S of the Income Tax Assessment Act 1997
Division 842—Exempt Australian source income and gains of foreign residents
Subdivision 842‑I—Investment manager regime
842‑207 Application of replacement version of Subdivision 842‑I
842‑208 Modified meaning of IMR foreign fund for the purposes of earlier income years
842‑209 Residence of corporate limited partnerships
842‑210 Treatment of IMR foreign fund that is a corporate tax entity
842‑215 Treatment of foreign resident beneficiary that is not a trust or partnership
842‑220 Treatment of foreign resident partner that is not a trust or partnership
842‑225 Treatment of trustee of an IMR foreign fund
842‑230 Pre‑2012 IMR deduction
842‑235 Pre‑2012 IMR capital loss
842‑240 Pre‑2012 non‑IMR net income, pre‑2012 non‑IMR Division 6E net income and pre‑2012 non‑IMR net capital gain
842‑245 Pre‑2012 non‑IMR partnership net income and pre‑2012 non‑IMR partnership loss
Division 880—Sovereign entities and activities
880‑1 Application of Division 880 of the Income Tax Assessment Act 1997
880‑5 Certain income of sovereign entity in respect of a scheme is non‑assessable non‑exempt income if covered by a private ruling
880‑10 Certain amounts of sovereign entity in respect of a scheme are not deductible if covered by a private ruling
880‑15 Sovereign entity’s capital gain from membership interest etc.—gain disregarded
880‑20 Sovereign entity’s capital loss from membership interest etc.—loss disregarded
880‑25 Asset of sovereign entity—deemed sale and purchase
Chapter 5—Administration
Part 5‑35—Miscellaneous
Division 909—Regulations
909‑1 Regulations
Chapter 6—The Dictionary
Part 6‑1—Concepts and topics
Division 960—General
Subdivision 960‑B—Utilisation of tax attributes
960‑20 Utilisation—corporate loss carry back
Subdivision 960‑E—Entities
960‑100 Effect of this Subdivision
960‑105 Entities, and members of entities, benefiting from the application of this Subdivision
960‑110 No taxation consequences to result from changes to managed investment scheme
960‑115 Certain entities treated as agents
Subdivision 960‑M—Indexation
960‑262 Application of Subdivision 960‑M of the Income Tax Assessment Act 1997
960‑275 Indexation factor
Endnotes
Endnote 1—About the endnotes
Endnote 2—Abbreviation key
Endnote 3—Legislation history
Endnote 4—Amendment history
40‑37 Post‑30 June 2001 mining expenditure
40‑38 Mining cash bidding payments
40‑40 Transport expenditure
40‑43 Post‑30 June 2001 transport expenditure
40‑44 No additional decline in certain cases
40‑45 Intellectual property
40‑47 IRUs
40‑50 Forestry roads and timber mill buildings
40‑55 Environmental impact assessment
40‑60 Pooling under Subdivision 42‑L of the former Act
40‑65 Substituted accounting periods
40‑67 Methods for working out decline in value
40‑70 References to amounts deducted and reductions in deductions
40‑72 New diminishing value method not to apply in some cases
40‑75 Mining expenditure incurred after 1 July 2001 on an asset
40‑77 Mining, quarrying or prospecting rights or information held before 1 July 2001
40‑80 Other expenditure incurred after 1 July 2001 on a depreciating asset
40‑100 Commissioner’s determination of effective life
40‑105 Calculations of effective life
40‑10 Plant
(1) This section applies to you if:
(a) you have deducted or can deduct amounts for plant under Division 42 of the Income Tax Assessment Act 1997 (the former Act) as in force just before it was amended by the New Business Tax System (Capital Allowances) Act 2001 and the New Business Tax System (Capital Allowances—Transitional and Consequential) Act 2001, or you could have deducted amounts under that Division for the plant if you had used it, or had it installed ready for use, for the purpose of producing assessable income before that day; and
(b) either:
(i) you hold the plant at 1 July 2001; or
(ii) subparagraph (i) does not apply and you were the owner or quasi‑owner of the plant at the end of 30 June 2001.
(2) Division 40 of the Income Tax Assessment Act 1997 as amended by the New Business Tax System (Capital Allowances) Act 2001 and the New Business Tax System (Capital Allowances—Transitional and Consequential) Act 2001 (the new Act) applies to the plant on this basis:
(a) the amount that was your undeducted cost at the end of 30 June 2001 becomes the plant’s opening adjustable value; and
(b) you use the same cost, effective life and method that you were using under Division 42 of the former Act, or that you would have used if you had used the plant for the purpose of producing assessable income at the end of 30 June 2001; and
(c) if you excluded an amount from your assessable income under section 42‑290 of the former Act for a balancing adjustment event that occurred on or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999—the cost of the plant, and its opening adjustable value, are reduced by that amount; and
(d) if subparagraph (1)(b)(ii) applies to you—you are treated as the holder of the plant while you are its holder or while the circumstances under which you would have been the owner or quasi‑owner of the plant under the former Act continue.
Note: There are special rules for entities that have substituted accounting periods: see section 40‑65.
(3) If you were using a rate for the plant under subsection 42‑160(1) or 42‑165(1) of the former Act just before 1 July 2001, or would have been using such a rate if you had used it, or had it installed ready for use, for the purpose of producing assessable income before that day, Division 40 of the new Act applies to the plant on this basis:
(a) for the diminishing value method—replace the component in the formula in subsection 40‑70(1) of the new Act that includes the plant’s effective life with the rate you were using; and
(b) for the prime cost method:
(i) replace the component in the formula in subsection 40‑75(1) of the new Act that includes the plant’s effective life with the rate you were using; and
(ii) increase the plant’s cost under Division 42 of the former Act by any amounts included in the second element of the plant’s cost after 30 June 2001.
Note 1: Recalculating effective life will have no practical effect for an entity to whom subsection (3) applies because the component in the relevant formula that relies on effective life has been replaced.
Note 2: Small business entities can choose to work out the decline in value of their depreciating assets under Division 328.
40‑12 Plant acquired after 30 June 2001
(1) This section applies to you if:
(a) you entered into a contract to acquire an item of plant before 1 July 2001 and you acquired it after 30 June 2001; or
(b) you started to construct an item of plant before 1 July 2001 and you complete its construction after 30 June 2001.
(2) Division 40 of the new Act applies to the plant.
(3) If you entered into the contract, or started to construct the plant, at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999, you replace the component in the formula in subsection 40‑70(1) or 40‑75(1) of the new Act that includes the plant’s effective life with the rate you would have been using if you had acquired it, or completed its construction, before 1 July 2001 and had used it, or had it installed ready for use, for the purpose of producing assessable income before that day.
40‑13 Accelerated depreciation for split or merged plant
(1) This section applies to a depreciating asset that is plant if:
(a) you entered into a contract to acquire the plant, you otherwise acquired it or you started to construct it before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; and
(b) you held it at the end of 30 June 2001; and
(c) on or after 1 July 2001:
(i) the plant is split into 2 or more depreciating assets; or
(ii) the plant is merged into another depreciating asset.
(2) For a case where the plant is split into 2 or more depreciating assets, the new Act applies as if you had acquired the assets into which it is split before the time mentioned in paragraph (1)(a) while you continue to hold those assets.
(3) For a case where the plant is merged into another depreciating asset, section 40‑125 of the new Act does not apply to the asset, or to your interest in the asset, into which it is merged while you continue to hold it.
40‑15 Recalculating effective life
You cannot recalculate the effective life of a depreciating asset for which:
(a) you were using, just before 1 July 2001, a rate under subsection 42‑160(1) or 42‑165(1) of the former Act; or
(b) you would have been using such a rate if you had used the asset, or had it installed ready for use, for the purpose of producing assessable income before that day.
40‑20 IRUs
(1) This section applies to you if:
(a) you have deducted or can deduct an amount for an IRU under Division 44 of the former Act or you would have been able to deduct an amount for it under that Division if you had used it for the purpose of producing assessable income before 1 July 2001; and
(b) you hold the IRU at 1 July 2001.
(2) Division 40 of the new Act applies to the IRU on this basis:
(a) you use the cost, effective life and method you were using under Division 44 of the former Act or that you would have used if you had used the IRU for the purpose of producing assessable income before 1 July 2001; and
(b) the amount that was your undeducted cost of the IRU at the end of 30 June 2001 becomes the IRU’s opening adjustable value.
Note: There are special rules for entities that have substituted accounting periods: see section 40‑65.
40‑25 Software
(1) Despite its repeal by this Act, Division 46 of the former Act continues to apply to expenditure on software that you incurred and that was in a software pool under that Division at the end of 30 June 2001.
(2) For a unit of software for which you were deducting amounts under Subdivision 46‑B of the former Act or for which you could have deducted amounts under that Subdivision if you had used the software for the purpose of producing assessable income before 1 July 2001, Division 40 of the new Act applies to the unit on this basis:
(a) its cost is the amount of expenditure you incurred on the unit; and
(b) you must use the prime cost method; and
(c) its opening adjustable value at 1 July 2001 is its undeducted cost at the end of 30 June 2001; and
(d) you must use the same effective life you were using under Subdivision 46‑B of the former Act or that you would have used if you had used the software for the purpose of producing assessable income before 1 July 2001.
Note: There are special rules for entities that have substituted accounting periods: see section 40‑65.
40‑30 Spectrum licences
(1) This section applies to you if you have deducted or can deduct an amount under Division 380 of the former Act for expenditure incurred in obtaining a spectrum licence on or before 30 June 2001 or you could have deducted an amount under that Division for that expenditure if you had used the licence for the purpose of producing assessable income on or before that day.
(2) Division 40 of the new Act applies to the spectrum licence on this basis:
(a) its cost is your expenditure incurred in obtaining the licence; and
(b) its opening adjustable value at 1 July 2001 is the amount of unrecouped expenditure for the licence at the end of 30 June 2001; and
(c) its effective life is the same as it had under the former Act; and
(d) you must use the prime cost method.
Note: There are special rules for entities that have substituted accounting periods: see section 40‑65.
40‑33 Datacasting transmitter licences
(1) This section applies to you if you hold a datacasting transmitter licence at 1 July 2001.
(2) Division 40 of the new Act applies to the licence on this basis:
(a) its cost is your expenditure incurred in obtaining the licence; and
(b) its opening adjustable value at 1 July 2001 is its cost; and
(c) its effective life is 15 years less any period that has elapsed from the day the licence was issued until 1 July 2001; and
(d) you must use the prime cost method.
40‑35 Mining unrecouped expenditure
(1) This section applies to you if you have an amount of unrecouped expenditure under Division 330 of the former Act at the end of 30 June 2001.
Note: Subsection (6) also applies to a case where you did not have unrecouped expenditure at 30 June 2001: see subsection (8).
(2) Division 40 of the new Act applies to the expenditure as if it were a depreciating asset (the notional asset) you hold on this basis:
(a) it has an opening adjustable value at 1 July 2001 equal to the amount of unrecouped expenditure reduced by any deductions allowable under section 330‑80 of the former Act for your income year ending on 30 June 2001; and
(b) it has a cost equal to the total amount of allowable capital expenditure under the former Act; and
(c) in applying the formula in section 40‑75 of the new Act for the income year in which 1 July 2001 occurs—you use the adjustments in subsection 40‑75(3) of the new Act; and
(d) it is taken to have been used for a taxable purpose at the start of 1 July 2001; and
(e) it has a remaining effective life worked out under subsection (3); and
(f) you must use the prime cost method.
Note: There are special rules for entities that have substituted accounting periods: see section 40‑65.
(3) The remaining effective life of the notional asset at the start of an income year (present income year) for which you are working out its decline in value is:
(a) for an amount of unrecouped expenditure in respect of expenditure incurred in carrying on eligible mining operations other than in the course of petroleum mining is the lesser of these:
(i) the number equal to the difference between 10 and the number of income years (which may be zero) before the present income year for which an amount in respect of expenditure was deductible;
(ii) the number equal to the number of whole years in the estimated life of the mine, or proposed mine, on the mining property, or, if there is more than one such mine, of the mine that has the longest estimated life, as at the end of the present income year; or
(b) for an amount of unrecouped expenditure in respect of expenditure incurred in carrying on eligible mining operations in the course of petroleum mining is the lesser of these:
(i) the number equal to the difference between 10 and the number of income years (which may be zero) before the present income year for which an amount in respect of expenditure was deductible;
(ii) the number equal to the number of whole years in the estimated life of the petroleum field or proposed petroleum field as at the end of the present income year; or
(c) for an amount of unrecouped expenditure in respect of expenditure incurred in carrying on eligible quarrying operations the lesser of these:
(i) the number equal to the difference between 20 and the number of income years (which may be zero) before the present income year for which an amount in respect of expenditure was deductible; and
(ii) the number equal to the number of whole years in the estimated life of the quarry, or proposed quarry, on the quarrying property, or, if there is more than one such quarry, of the quarry that has the longest estimated life, as at the end of the present income year.
(4) Sections 40‑95 and 40‑110 of the new Act do not apply to the unrecouped expenditure.
(5) If either:
(a) both of these subparagraphs apply:
(i) any of the unrecouped expenditure referred to in subsection (1) relates to a depreciating asset (the real asset);
(ii) in an income year (the cessation year) you stop holding the real asset, or stop using it for a taxable purpose; or
(b) both of these subparagraphs apply:
(i) any of the unrecouped expenditure referred to in subsection (1) relates to property that is not a depreciating asset (the other property);
(ii) in the cessation year, the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose;
there is an additional decline in value of the notional asset for the cessation year equal to so much of the notional asset’s adjustable value as relates to the real asset or the other property and has not been taken into account in working out the amount of a balancing adjustment in relation to the real asset.
(6) If the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose, you must include in your assessable income:
(a) if the other property is sold for a price specific to that property—that price, less the expenses of the sale (to the extent the expenses are reasonably attributable to selling that particular property); or
(b) if the other property is sold with additional property without a specific price being allocated to it—the part of the total sale price, less the reasonably attributable expenses of the sale, that is reasonably attributable to selling the other property; or
(c) if the other property is lost or destroyed—the amount or value received or receivable under an insurance policy or otherwise for the loss or destruction; or
(d) if you own the other property and you stop using it for a taxable purpose—its market value at that time; or
(e) if you do not own the property and you stop using it for a taxable purpose—a reasonable amount.
However, the amount included is reduced to the extent (if any) that it is also included under subsection 40‑830(6) of the new Act.
(7) If section 40‑115 of the new Act applies, or section 40‑125 of the new Act would, apart from this subsection, apply, to the real asset referred to in subsection (5) of this section, then:
(a) if the real asset is split into 2 or more depreciating assets and you stop holding, or stop using for a taxable purpose, one or more but not all of the assets into which it is split—subsection (5) does not apply to that asset or assets into which it is split that you continue to hold and continue to use for a taxable purpose; or
(b) if the real asset is merged into another depreciating asset—section 40‑125 does not apply to the asset into which it is merged while you continue to hold it.
(8) Subsection (6) also applies to a case where:
(a) you did not have an amount of unrecouped expenditure under Division 330 of the former Act at the end of 30 June 2001, but you had an amount of unrecouped expenditure under that Division before 30 June 2001; and
(b) that expenditure relates to property that is not a depreciating asset (the other property); and
(c) after that day, the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose.
40‑37 Post‑30 June 2001 mining expenditure
(1) This section applies to you if:
(a) you incur expenditure after 30 June 2001 under a contract entered into before that day; and
(b) the expenditure would have been allowable capital expenditure, and you could have deducted an amount for it, under Division 330 of the former Act if you had incurred it before 1 July 2001; and
(c) the expenditure does not relate to a depreciating asset.
(2) Division 40 of the new Act applies to the expenditure as if it were a depreciating asset (the notional asset) you hold on this basis:
(a) it has a cost at the time you incur the expenditure equal to the amount of the expenditure; and
(b) in applying the formula in section 40‑75 of the new Act for the income year in which you incur the expenditure—you use the adjustments in subsection 40‑75(3) of the new Act; and
(c) it is taken to be used for a taxable purpose when you incur the expenditure; and
(d) it has an effective life worked out under subsection (3); and
(e) you must use the prime cost method.
Note: There are special rules for entities that have substituted accounting periods: see section 40‑65.
(3) The effective life of the notional asset at the start of an income year (present income year) for which you are working out its decline in value is:
(a) for an amount of expenditure incurred in carrying on eligible mining operations other than in the course of petroleum mining—the lesser of 10 and the number equal to the number of whole years in the estimated life of the mine, or proposed mine, on the mining property, or, if there is more than one such mine, of the mine that has the longest estimated life, as at the end of the present income year; or
(b) for an amount of expenditure incurred in carrying on eligible mining operations in the course of petroleum mining—the lesser of 10 and the number equal to the number of whole years in the estimated life of the petroleum field or proposed petroleum field as at the end of the present income year; or
(c) for an amount of expenditure incurred in carrying on eligible quarrying operations—the lesser of 20 and the number equal to the number of whole years in the estimated life of the quarry, or proposed quarry, on the quarrying property, or, if there is more than one such quarry, of the quarry that has the longest estimated life, as at the end of the present income year.
(4) Sections 40‑95 and 40‑110 of the new Act do not apply to the expenditure.
(5) If both of these paragraphs apply:
(a) any of the expenditure referred to in subsection (1) relates to property that is not a depreciating asset (the other property);
(b) in an income year (the cessation year), the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose;
there is an additional decline in value of the notional asset for the cessation year equal to so much of the notional asset’s adjustable value as relates to the other property.
(6) If the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose, you must include in your assessable income:
(a) if the other property is sold for a price specific to that property—that price, less the expenses of the sale (to the extent the expenses are reasonably attributable to selling that particular property); or
(b) if the other property is sold with additional property without a specific price being allocated to it—the part of the total sale price, less the reasonably attributable expenses of the sale, that is reasonably attributable to selling the other property; or
(c) if the other property is lost or destroyed—the amount or value received or receivable under an insurance policy or otherwise for the loss or destruction; or
(d) if you own the other property and you stop using it for a taxable purpose—its market value at that time; or
(e) if you do not own the property and you stop using it for a taxable purpose—a reasonable amount.
However, the amount included is reduced to the extent (if any) that it is also included under subsection 40‑830(6) of the new Act.
40‑38 Mining cash bidding payments
(1) This section applies to expenditure you incur, under a contract entered into before 30 June 2001, if:
(a) the expenditure would have been a mining cash bidding payment under Subdivision 330‑D of the former Act; and
(b) either:
(i) you incurred the expenditure before that day but the grant of the mining authority concerned occurred on a day (the start day) after 30 June 2001; or
(ii) the grant of the mining authority concerned occurred before 30 June 2001 but you incurred the expenditure on a day (also the start day) after 30 June 2001.
(2) Division 40 of the new Act applies to the expenditure as if it were a depreciating asset (the notional asset) you hold on this basis:
(a) it has a cost at the start day equal to the amount of the expenditure; and
(b) in applying the formula in section 40‑75 of the new Act for the income year in which the start day occurs—you use the adjustments in subsection 40‑75(3) of the new Act; and
(c) it is taken to be used for a taxable purpose on the start day; and
(d) it has an effective life worked out under subsection (3); and
(e) you must use the prime cost method.
Note: There are special rules for entities that have substituted accounting periods: see section 40‑65.
(3) The effective life of the notional asset at the start of an income year (present income year) for which you are working out its decline in value is:
(a) for an amount of expenditure incurred in carrying on eligible mining operations other than in the course of petroleum mining—the lesser of 10 and the number equal to the number of whole years in the estimated life of the mine, or proposed mine, on the mining property, or, if there is more than one such mine, of the mine that has the longest estimated life, as at the end of the present income year; or
(b) for an amount of expenditure incurred in carrying on eligible mining operations in the course of petroleum mining—the lesser of 10 and the number equal to the number of whole years in the estimated life of the petroleum field or proposed petroleum field as at the end of the present income year.
(4) Sections 40‑95 and 40‑110 of the new Act do not apply to the expenditure.
(5) If both of these paragraphs apply:
(a) any of the expenditure referred to in subsection (1) relates to a depreciating asset (the real asset);
(b) in an income year (the cessation year) you stop holding the real asset, or stop using it for a taxable purpose;
there is an additional decline in value of the notional asset for the cessation year equal to so much of the notional asset’s adjustable value as relates to the real asset and has not been taken into account in working out the amount of a balancing adjustment in relation to the real asset.
(6) If section 40‑115 of the new Act applies, or section 40‑125 of the new Act would, apart from this subsection, apply, to the real asset referred to in subsection (5) of this section, then:
(a) if the real asset is split into 2 or more depreciating assets and you stop holding, or stop using for a taxable purpose, one or more but not all of the assets into which it is split—subsection (5) does not apply to that asset or assets into which it is split that you continue to hold and continue to use for a taxable purpose; or
(b) if the real asset is merged into another depreciating asset—section 40‑125 does not apply to the asset into which it is merged while you continue to hold it.
40‑40 Transport expenditure
(1) This section applies to you if you have deducted or can deduct an amount for transport capital expenditure in respect of a transport facility under Subdivision 330‑H of the former Act, or you could have deducted an amount for the expenditure under that Subdivision if you had started to use the facility for a qualifying purpose before 1 July 2001.
(2) Division 40 of the new Act applies to the expenditure as if it were a depreciating asset (the notional asset) you hold on this basis:
(a) it has an opening adjustable value at 1 July 2001 equal to the total amount of transport capital expenditure under the former Act less the amounts you have deducted or can deduct for that expenditure under the former Act; and
(b) it has a cost equal to the total amount of transport capital expenditure under the former Act; and
(c) in applying the formula in section 40‑75 of the new Act for your income year in which 1 July 2001 occurs—you use the adjustments in subsection 40‑75(3) of the new Act; and
(ca) it is taken to have been used for a taxable purpose at the start of 1 July 2001; and
(d) it has an effective life at the start of 1 July 2001 equal to the years remaining for the expenditure under section 330‑395 of the former Act; and
(e) you must use the prime cost method.
Note: There are special rules for entities that have substituted accounting periods: see section 40‑65.
(3) Sections 40‑95 and 40‑110 of the new Act do not apply to the expenditure.
(4) If either:
(a) both of these subparagraphs apply:
(i) any of the transport capital expenditure referred to in subsection (1) relates to a depreciating asset (the real asset);
(ii) in an income year (the cessation year) you stop holding the real asset, or stop using it for a taxable purpose; or
(b) both of these subparagraphs apply:
(i) any of the transport capital expenditure referred to in subsection (1) relates to property that is not a depreciating asset (the other property);
(ii) in the cessation year, the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose;
there is an additional decline in value of the notional asset for the cessation year equal to so much of the notional asset’s adjustable value as relates to the real asset or the other property and has not been taken into account in working out the amount of a balancing adjustment in relation to the real asset.
(5) If the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose, you must include in your assessable income:
(a) if the other property is sold for a price specific to that property—that price, less the expenses of the sale (to the extent the expenses are reasonably attributable to selling that particular property); or
(b) if the other property is sold with additional property without a specific price being allocated to it—the part of the total sale price, less the reasonably attributable expenses of the sale, that is reasonably attributable to selling the other property; or
(c) if the other property is lost or destroyed—the amount or value received or receivable under an insurance policy or otherwise for the loss or destruction; or
(d) if you own the other property and you stop using it for a taxable purpose—its market value at that time; or
(e) if you do not own the property and you stop using it for a taxable purpose—a reasonable amount.
However, the amount included is reduced to the extent (if any) that it is also included under subsection 40‑830(6) of the new Act.
(6) If section 40‑115 of the new Act applies, or section 40‑125 of the new Act would, apart from this subsection, apply, to the real asset referred to in subsection (4) of this section, then:
(a) if the real asset is split into 2 or more depreciating assets and you stop holding, or stop using for a taxable purpose, one or more but not all of the assets into which it is split—subsection (4) does not apply to that asset or assets into which it is split that you continue to hold and continue to use for a taxable purpose; or
(b) if the real asset is merged into another depreciating asset—section 40‑125 does not apply to the asset into which it is merged while you continue to hold it.
40‑43 Post‑30 June 2001 transport expenditure
(1) This section applies to you if:
(a) you incur expenditure after 30 June 2001 under a contract entered into before that day; and
(b) the expenditure would have been transport capital expenditure in respect of a transport facility, and you could have deducted an amount for it, under Subdivision 330‑H of the former Act if you had incurred it before 1 July 2001 and you had started to use the facility for a qualifying purpose before 1 July 2001; and
(c) the expenditure does not relate to a depreciating asset.
(2) Division 40 of the new Act applies to the expenditure as if it were a depreciating asset (the notional asset) you hold on this basis:
(a) it has a cost at the time you incur the expenditure equal to the amount of the expenditure; and
(b) in applying the formula in section 40‑75 of the new Act for your income year in which you incur the expenditure—you use the adjustments in subsection 40‑75(3) of the new Act; and
(c) it is taken to have been used for a taxable purpose when you incur the expenditure; and
(d) it has an effective life when you incur the expenditure equal to the years remaining for the expenditure under section 330‑395 of the former Act; and
(e) you must use the prime cost method.
Note: There are special rules for entities that have substituted accounting periods: see section 40‑65.
(3) Sections 40‑95 and 40‑110 of the new Act do not apply to the expenditure.
(4) If both of these paragraphs apply:
(a) any of the expenditure referred to in subsection (1) relates to property that is not a depreciating asset (the other property);
(b) in an income year (the cessation year), the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose;
there is an additional decline in value of the notional asset for the cessation year equal to so much of the notional asset’s adjustable value as relates to the other property.
(5) If the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose, you must include in your assessable income:
(a) if the other property is sold for a price specific to that property—that price, less the expenses of the sale (to the extent the expenses are reasonably attributable to selling that particular property); or
(b) if the other property is sold with additional property without a specific price being allocated to it—the part of the total sale price, less the reasonably attributable expenses of the sale, that is reasonably attributable to selling the other property; or
(c) if the other property is lost or destroyed—the amount or value received or receivable under an insurance policy or otherwise for the loss or destruction; or
(d) if you own the other property and you stop using it for a taxable purpose—its market value at that time; or
(e) if you do not own the property and you stop using it for a taxable purpose—a reasonable amount.
However, the amount included is reduced to the extent (if any) that it is also included under subsection 40‑830(6) of the new Act.
40‑44 No additional decline in certain cases
(1) Despite subsections 40‑35(5), 40‑38(5) and 40‑40(4), there is no additional decline in the value of the notional asset referred to in those subsections if:
(a) apart from this section, subsection 40‑35(5), 40‑38(5) or 40‑40(4) would apply because the real asset referred to in that subsection is disposed of; and
(b) roll‑over relief is chosen under subsection 40‑340(3) of the Income Tax Assessment Act 1997 for the disposal.
(2) Instead, the cost to the transferee of that real asset is the sum of:
(a) the adjustable value of that real asset; and
(b) the adjustable value of the notional asset referred to in subsection 40‑35(5), 40‑38(5) or 40‑40(4);
just before the disposal.
40‑45 Intellectual property
(1) This section applies to you if:
(a) at the end of 30 June 2001, you hold an item of intellectual property referred to in the table in section 373‑35 of the former Act; and
(b) you have deducted or can deduct an amount for expenditure on the asset under Division 373 of the former Act or you could have deducted an amount under that Division for that expenditure if you had used the asset for the purpose of producing assessable income on or before that day.
(2) Division 40 of the new Act applies to the item on this basis:
(a) it has an opening adjustable value at 1 July 2001 equal to its unrecouped expenditure under the former Act at the end of 30 June 2001; and
(b) its cost is its original unrecouped expenditure under the former Act; and
(c) its effective life is the same as it had under the former Act; and
(d) you must use the prime cost method.
Note: There are special rules for entities that have substituted accounting periods: see section 40‑65.
40‑47 IRUs
(1) Division 40 of the new Act does not apply to an IRU to the extent to which expenditure on the IRU was incurred at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999 (the IRU time).
(2) Division 40 of the new Act does not apply to an IRU over an international telecommunications submarine cable system if the system had been used for telecommunications purposes at or before the IRU time.
40‑50 Forestry roads and timber mill buildings
(1) This section applies to you if:
(a) you have deducted or can deduct an amount under Subdivision 387‑G of the former Act for an amount (the qualifying amount) of expenditure on a forestry road or timber mill building or could have deducted an amount under that Subdivision if you had used the road or building for the purpose of producing assessable income; and
(b) you hold the road or building at the end of 30 June 2001.
(2) Division 40 of the new Act applies to the asset on this basis:
(a) it has an opening adjustable value at 1 July 2001 equal to the qualifying amount less any amounts you have deducted or can deduct for it under the former Act; and
(b) in applying the formula in section 40‑75 of the new Act for your income year in which 1 July 2001 occurs—you use the adjustments in subsection 40‑75(3) of the new Act; and
(c) its cost is the qualifying amount; and
(d) it has an effective life equal to the remaining life you last estimated for it under the former Act; and
(e) you can recalculate its effective life if you conclude that your estimate is no longer accurate (except that the effective life cannot exceed 25 years); and
(f) you must use the prime cost method.
Note: There are special rules for entities that have substituted accounting periods: see section 40‑65.
40‑55 Environmental impact assessment
(1) This section applies to you if you have deducted or can deduct an amount under Subdivision 400‑A of the former Act for an amount (the qualifying amount) of expenditure on or before 30 June 2001 on evaluating the impact on the environment of a project under Subdivision 400‑A of the former Act.
(2) Division 40 of the new Act applies to the qualifying amount as if it were a depreciating asset on this basis:
(a) it has an opening adjustable value at 1 July 2001 equal to the qualifying amount less any amounts you have deducted or can deduct for it under the former Act or the Income Tax Assessment Act 1936; and
(b) it has a cost equal to the qualifying amount; and
(c) it has an effective life equal to the number of years for which you could deduct for the qualifying amount worked out under subsection 400‑15(3) of the former Act; and
(d) you must use the prime cost method.
Note: There are special rules for entities that have substituted accounting periods: see section 40‑65.
40‑60 Pooling under Subdivision 42‑L of the former Act
(1) Units of plant that you had allocated to a pool under Subdivision 42‑L of the former Act and that were allocated to the pool by 30 June 2001 are treated as a single depreciating asset for the purposes of Division 40 of the new Act.
(2) Division 40 of the new Act applies to the single depreciating asset on this basis:
(a) its cost and opening adjustable value at 1 July 2001 is the closing balance of the pool for your income year in which 30 June 2001 occurred; and
(b) you must use the diminishing value method; and
(c) in applying the formula in section 40‑70 of the new Act for your income year in which 1 July 2001 occurs—it has a base value equal to that opening adjustable value; and
(d) you replace the component in the formula in subsection 40‑70(1) of the new Act that includes an asset’s effective life with the pool percentage you were using for the pool; and
(e) if an item of plant is removed from the pool because a balancing adjustment event occurs for the item or because of subsection (3) of this section, section 40‑115 of the new Act applies so that you are treated as having split the single depreciating asset into the removed asset and the remaining assets in the pool; and
(f) if an amount is included in the second element of the cost of a depreciating asset in the pool, Division 40 of the new Act applies as if that amount had been included in the second element of the cost of the single asset.
Note: There are special rules for entities that have substituted accounting periods: see section 40‑65.
(3) An item of plant in the pool is automatically removed from the pool if you stop using it wholly for taxable purposes (except because a balancing adjustment event occurs for the item).
Note 1: You work out the decline in value of an item removed under this subsection under Subdivision 40‑B of the new Act, using the cost for it worked out under section 40‑205 of the new Act.
Note 2: There are special rules for entities that have substituted accounting periods: see section 40‑65.
40‑65 Substituted accounting periods
(1) This section sets out special rules for the application of Division 40 of the new Act to an entity that:
(a) has a substituted accounting period; and
(b) because of a provision of this Subdivision, uses Division 40 of the new Act to work out the decline in value of an asset, or of something that is treated as an asset.
(2) The entity works out its deductions for its income year that includes 1 July 2001 (the calculation year) in this way:
(a) the entity works out its deductions for that asset under the former Act as from the start of its calculation year up to the end of 30 June 2001 as if that period were an income year; and
(b) the entity works out the decline in value of the asset under Division 40 of the new Act from 1 July 2001 until the end of its calculation year as if that period were an income year in accordance with the following provisions of this section.
(3) The asset’s opening adjustable value for the purposes of Division 40 of the new Act is:
(a) for a unit of plant (including IRUs and expenditure on software that is not pooled)—its undeducted cost at the end of 30 June 2001; or
(b) for expenditure on eligible mining or quarrying operations, an item of intellectual property or a spectrum licence—the amount of unrecouped expenditure for the expenditure, item or licence under the former Act at the end of 30 June 2001 reduced, in the case of eligible mining or quarrying operations, by an amount you have deducted or can deduct for the calculation year under the former Act and not yet taken into account in calculating unrecouped expenditure; or
(c) for transport capital expenditure—the entity’s amount of transport capital expenditure under the former Act at the end of 30 June 2001 less any amounts the entity has deducted or can deduct for it under the former Act up to that time; or
(d) for expenditure on a forestry road, a timber mill building, a horticultural plant or a grapevine—the amount of that expenditure less any amounts the entity has deducted or can deduct for it under the former Act up to 30 June 2001; or
(e) for expenditure on evaluating the impact on the environment of a project—the amount of that expenditure less any amounts the entity has deducted or can deduct for it under the former Act up to 30 June 2001; or
(f) for assets that were pooled under Subdivision 42‑M or 42‑L of the former Act—the closing balance of the pool at the end of 30 June 2001.
(4) The asset’s base value for applying the formula in section 40‑70 of the new Act for the diminishing value method is that opening adjustable value.
(5) The decline in value for the assets referred to in this subsection is worked out using the prime cost method without the adjustments in subsection 40‑75(3) of the new Act, and the opening adjustable value specified in subsection (3) of this section, in this way:
(a) for an item of plant for which you were using the prime cost method—using the rules in section 40‑10 of this Act; and
(b) for an IRU for which you were using the prime cost method—using the rules in section 40‑20 of this Act; and
(c) for a unit of software for which the entity was deducting amounts under Subdivision 46‑B of the former Act—using the rules in subsection 40‑25(2) of this Act; and
(d) for a spectrum licence—using the rules in section 40‑30 of this Act; and
(e) for an item of intellectual property—using the rules in section 40‑45 of this Act; and
(f) for an amount of expenditure on evaluating the impact on the environment of a project—using the rules in section 40‑55 of this Act.
(6) The decline in value for the assets referred to in this subsection is worked out using the prime cost method using the adjustments in subsection 40‑75(3) of the new Act, and the opening adjustable value specified in subsection (3) of this section, in this way:
(a) for an amount of unrecouped expenditure under Division 330 of the former Act—using the rules in section 40‑35 of this Act; and
(b) for an amount of transport capital expenditure under Division 330 of the former Act—using the rules in section 40‑40 of this Act; and
(c) for a forestry road or timber mill building—using the rules in section 40‑50 of this Act.
(7) The entity must work out the decline in value of each of the assets for later income years under Division 40 of the new Act.
(8) The entity must, in working out its deductions under this section for the calculation year for:
(a) allowable capital expenditure for which the entity had deducted or can deduct an amount under Subdivision 330‑C of the former Act; or
(b) transport capital expenditure for which the entity had deducted or can deduct an amount under Subdivision 330‑H of the former Act; or
(c) a water facility for which the entity had deducted or can deduct an amount under Subdivision 387‑B of the former Act; or
(d) expenditure on connecting power to land or upgrading the connection for which the entity had deducted or can deduct an amount under Subdivision 387‑E of the former Act; or
(e) expenditure on a telephone line on or extending to land for which the entity had deducted or can deduct an amount under Subdivision 387‑E of the former Act;
reduce its deductions for each of the periods referred to in paragraphs (2)(a) and (b) by multiplying the deduction for that period by the number of days in that period and dividing the result by 365.
(9) The entity cannot deduct anything for an asset referred to in this section under the former Act for any part of its calculation year after 30 June 2001.
(10) You are entitled to a further deduction for a depreciating asset for which you are using the diminishing value method if the sum of the deductions worked out under paragraphs (2)(a) and (b) (the sum amount) is less than the deduction to which you would have been entitled for the asset if the former Act had continued to apply to the whole of the calculation year (the former Act amount).
(11) You increase the amount worked out under paragraph (2)(b) by the difference between the former Act amount and the sum amount.
40‑67 Methods for working out decline in value
(1) Subsections 40‑65(6) and (7) of the Income Tax Assessment Act 1997 apply with the changes set out in this section if either or both of the following events have happened:
(a) you have deducted one or more amounts under former section 73BA of the Income Tax Assessment Act 1936 for an asset;
(b) you could have deducted one or more amounts under that former section for the asset if you had not chosen tax offsets under former section 73I of that Act.
(2) Assume:
(a) paragraph 40‑65(6)(a) of the Income Tax Assessment Act 1997 included both events set out in subsection (1) of this section; and
(b) subsections 40‑65(6) and (7) of that Act deal with all 4 kinds of events in a corresponding way to the way that they deal with 2 kinds of events.
40‑70 References to amounts deducted and reductions in deductions
(1) A reference in the new Act to an amount that you have deducted or can deduct for a depreciating asset under Division 40 of the new Act includes a reference to an amount that you have deducted or can deduct for a capital allowance relating to the asset under the former Act or the Income Tax Assessment Act 1936.
(2) An amount you have deducted or can deduct for a water facility under Subdivision 387‑B of the former Act or former section 75B of the Income Tax Assessment Act 1936 is taken to have been deducted under Subdivision 40‑F of the new Act.
(3) A reference in the new Act to a reduction in your deduction for a depreciating asset includes a reference to amounts by which your deductions for the asset were reduced under the former Act or the Income Tax Assessment Act 1936.
40‑72 New diminishing value method not to apply in some cases
(1) If:
(a) you are taken to start holding a depreciating asset on or after 10 May 2006 because of section 40‑115 (about splitting a depreciating asset) or 40‑125 (about merging depreciating assets) of the Income Tax Assessment Act 1997; and
(b) it is reasonable to conclude that you split the asset or merged the assets for the main purpose of ensuring that the decline in value of the asset or assets (after the splitting or merging) would be worked out under section 40‑72 of that Act;
that Act applies to you as if you had started to hold the split or merged asset or assets before 10 May 2006.
(2) The Income Tax Assessment Act 1997 applies to you as if you had started to hold a depreciating asset before 10 May 2006 if:
(a) you had actually started to hold it before that day; and
(b) on or after 10 May 2006, you stop holding the depreciating asset; and
(c) it is reasonable to conclude that you did this for the main purpose of ensuring that the decline in value of the asset would be worked out under section 40‑72 of that Act.
(3) The Income Tax Assessment Act 1997 applies to you as if you had started to hold a depreciating asset (the substituted asset) before 10 May 2006 if:
(a) you started to hold the substituted asset on or after that day under an arrangement; and
(b) the substituted asset is identical to or has a purpose similar to another depreciating asset that another entity acquired from you on or after that day under that arrangement; and
(c) you did not deal with the other entity at arm’s length; and
(d) it is reasonable to conclude that you entered into the arrangement for the main purpose of ensuring that the decline in value of the substituted asset would be worked out under section 40‑72 of that Act.
40‑75 Mining expenditure incurred after 1 July 2001 on an asset
(1) This section applies to you if:
(a) you hold a depreciating asset (except a mining, quarrying or prospecting right that you started to hold before 1 July 2001) that you:
(i) started to hold under a contract entered into before 1 July 2001; or
(ii) constructed where the construction started before that day; or
(iii) started to hold in some other way before that day; and
(b) your expenditure on the asset, whenever incurred, would have been allowable capital expenditure, transport capital expenditure or expenditure on exploration or prospecting within the meaning of Division 330 of the former Act if it had been incurred before 1 July 2001.
(2) If you incur expenditure on the asset after 30 June 2001 that forms part of the cost of the asset, you can deduct the expenditure for the income year in which you incur it if it would have been expenditure on exploration or prospecting within the meaning of Division 330 of the former Act.
(3) Otherwise, Subdivision 40‑B of the new Act applies to the asset on the basis that it has a cost, and an adjustable value, of zero at the start of 1 July 2001, and an effective life on that day or at its start time, whichever is the later, worked out under subsection (4) of this section.
(4) The effective life of the depreciating asset is the shorter of its effective life worked out under Division 40 and:
(a) if the expenditure on the asset was incurred in relation to eligible mining operations other than in the course of petroleum mining—the shorter of:
(i) 10 years; and
(ii) the number of whole years in the estimated life of the mine or proposed mine to which the expenditure relates or, if there is more than one such mine, of the mine that has the longest estimated life; or
(b) if the expenditure on the asset was incurred in relation to eligible mining operations in the course of petroleum mining—the shorter of:
(i) 10 years; and
(ii) the number of whole years in the estimated life of the petroleum field or proposed petroleum field to which the expenditure relates; or
(c) if the expenditure on the asset was incurred in relation to eligible quarrying operations—the shorter of:
(i) 20 years; or
(ii) the number of whole years in the estimated life of the quarry or proposed quarry to which the expenditure relates or, if there is more than one such quarry, of the quarry that has the longest estimated life.
40‑77 Mining, quarrying or prospecting rights or information held before 1 July 2001
(1) Division 40 of the new Act does not apply to a mining, quarrying or prospecting right that you started to hold before 1 July 2001.
Note: If you incur expenditure relating to assets of that kind, you cannot deduct it under Division 40. However, the expenditure may be taken into account in calculating a capital gain or capital loss under Part 3‑1 or 3‑3 of the Income Tax Assessment Act 1997.
(1A) Division 40 of the new Act does not apply to a renewal or extension of a mining, quarrying or prospecting right that you started to hold before 1 July 2001.
(1B) Subsection (1) applies to a mining, quarrying or prospecting right (the new right) that you start to hold on or after 1 July 2001 as if you had started to hold the new right before that day if:
(a) you started to hold another mining, quarrying or prospecting right before that day; and
(b) the other right ends on or after that day; and
(c) the new right and the other right relate to the same area, or any difference in area is not significant.
(1C) Division 40 of the new Act does not apply to a mining, quarrying or prospecting right if:
(a) a company (the original holder) started to hold the right before 1 July 2001; and
(b) the right is transferred after that day to another company where:
(i) the other company is a member of the same wholly‑owned group as the original holder and was a member of that group just before that day; and
(ii) the right was held in the period between that day and the time of the transfer by a company or companies that were members of that group on that day and at the time of the transfer.
(1D) Division 40 of the new Act does not apply to an interest in a mining, quarrying or prospecting right that you started to hold on or after 1 July 2001 if:
(a) you acquired the interest under an interest realignment arrangement; and
(b) the interest was acquired in exchange for one or more other interests in other mining, quarrying or prospecting rights all of which you had started to hold before 1 July 2001.
(1E) If:
(a) you acquired, under an interest realignment arrangement, an interest (a new interest) in a mining, quarrying or prospecting right; and
(b) the interest was acquired in exchange for one or more other interests (old interests) in other mining, quarrying or prospecting rights; and
(c) you started to hold some of the old interests before 1 July 2001;
Division 40 of the new Act applies to the new interest only to the extent that the new interest was acquired in exchange for the old interests that you started to hold on or after 1 July 2001.
(2) If, after 30 June 2001:
(a) you dispose of a mining, quarrying or prospecting right that you started to hold before 1 July 2001 to an associate of yours (except a company that is a member of the same wholly‑owned group); or
(b) you enter into an arrangement in relation to such a right under which you maintain, in essence, the economic ownership of the right but not its legal ownership;
the cost of the right to the purchaser is limited, for the purposes of Division 40 of the new Act, to a maximum of the costs that would have been deductible for the right under Division 330 of the former Act.
(3) An amount that would be included in your assessable income under section 15‑40 or subsection 40‑285(1) of the new Act in respect of mining, quarrying or prospecting information you started to hold before 1 July 2001 is reduced (but not below zero) by so much of the capital cost of acquiring the information that you incurred before that day and that:
(a) you have not deducted and cannot deduct (either immediately or over time) under the former Act; and
(b) did not form part of allowable capital expenditure under the former Act; and
(c) did not entitle you to a deduction under section 330‑235 of the former Act;
but only to the extent that you have not already applied the amount under this section.
(4) Your assessable income includes an amount if:
(a) after 1 July 2001, you stop holding a mining, quarrying or prospecting right that you started to hold before that day; and
(b) you have deducted or can deduct an amount for it under Subdivision 330‑C in relation to Subdivision 330‑D or 330‑E of the former Act.
The amount included is the amount you have deducted or can deduct.
(5) Your assessable income also includes an amount if:
(a) after 1 July 2001, you stop holding a mining, quarrying or prospecting right that you started to hold before that day; and
(b) because of section 40‑35 or 40‑38 of this Act, you have deducted or can deduct an amount for a notional asset that relates to expenditure on the right under Division 40 of the new Act.
The amount included is the amount you have deducted or can deduct.
(6) Division 110 of the new Act applies as if an amount included in assessable income under subsection (4) or (5) of this section were the reversal of a deduction under a provision of the new Act outside Parts 3‑1 and 3‑3 and Division 243.
(7) An amount that would be included in your assessable income under subsection 40‑285(1) of the new Act in respect of a mining, quarrying or prospecting right is reduced by an amount worked out under subsection (8) if:
(a) you acquired the right from an associate (except a company that is a member of the same wholly‑owned group) on or after 1 July 2001; and
(b) the associate started to hold the right before that day.
(8) The amount is reduced (but not below zero) by the difference between the capital cost that you incurred after that day and the amount to which the cost of the right is limited under subsection (2) of this section.
40‑80 Other expenditure incurred after 1 July 2001 on a depreciating asset
(1) This section applies to you if:
(a) you incur expenditure after 30 June 2001 that forms part of the cost of a depreciating asset; and
(b) the depreciating asset is one that you:
(i) started to hold under a contract entered into before 1 July 2001; or
(ii) constructed where the construction started before that day; or
(iii) started to hold in some other way before that day; and
(c) if you had incurred the expenditure before 1 July 2001, and had satisfied any relevant requirement for deductibility, you would have been able to deduct an amount for it under Division 44, 373 or 380, or Subdivision 46‑B or 387‑G, of the former Act.
(2) Subdivision 40‑B of the new Act applies to the asset on the basis that it has a cost, and an adjustable value, of zero at the start of 1 July 2001.
40‑100 Commissioner’s determination of effective life
A determination by the Commissioner of the effective life of an asset that was made under section 42‑110 of the former Act and that was in force at the end of 30 June 2001 has effect as if it had been made under section 40‑100 of the new Act.
40‑105 Calculations of effective life
(1) This section applies to the following (the instrument):
(a) a determination under section 40‑100 of the Income Tax Assessment Act 1997 of the effective life of an asset;
(b) a calculation under section 40‑105 of that Act of the effective life of an asset;
if the instrument was in force immediately before the commencement of Schedule 1 to the Tax Laws Amendment (Research and Development) Act 2011.
(2) The instrument has effect, after that commencement, as if it had been made under that section as amended by the Tax Laws Amendment (Research and Development) Act 2011.
Subdivision 40‑BA—Backing business investment
Table of sections
40‑120 Backing business investment—accelerated decline in value for businesses with turnover less than $500 million
40‑125 Backing business investment—when an asset of yours qualifies
40‑130 Method for working out accelerated decline in value
40‑135 Division 40 of the Income Tax Assessment Act 1997 applies to later years
40‑137 Choice to not apply this Subdivision to an asset
40‑120 Backing business investment—accelerated decline in value for businesses with turnover less than $500 million
(1) For the purposes of Division 40 of the Income Tax Assessment Act 1997, the decline in value of a depreciating asset for an income year is the amount worked out under section 40‑130 if:
(a) the income year is the year in which you start to use the asset, or have it installed ready for use, for a taxable purpose; and
(b) subsection (2) (about businesses with turnover less than $500 million) applies to you for the year and for the income year in which you started to hold the asset (if that was an earlier year); and
(c) you are covered by section 40‑125 for the asset; and
(d) you have not made a choice under section 40‑137 in relation to the income year.
Note 1: An effect of paragraph (1)(a) is that this Subdivision only applies to one income year per asset. See also subsection 40‑135(1).
Note 2: This subsection does not apply if Subdivision 40‑BB of this Act applies: see section 40‑145 of this Act.
Businesses with turnover less than $500 million
(2) This subsection applies to you for an income year if you:
(a) are a small business entity; or
(b) would be a small business entity if:
(i) each reference in Subdivision 328‑C of the Income Tax Assessment Act 1997 (about what is a small business entity) to $10 million were instead a reference to $500 million; and
(ii) the reference in paragraph 328‑110(5)(b) of that Act to a small business entity were instead a reference to an entity covered by this subsection.
Exception—assets for which the decline in value is worked out under section 40‑82 or Subdivision 40‑E or 40‑F of the Income Tax Assessment Act 1997
(3) However, this section does not apply to a depreciating asset for an income year if you work out the decline in value of the asset for the income year under any of the following:
(a) section 40‑82 of the Income Tax Assessment Act 1997;
(b) Subdivision 40‑E or 40‑F of that Act.
40‑125 Backing business investment—when an asset of yours qualifies
(1) For the purposes of paragraph 40‑120(1)(c) and section 328‑182, you are covered by this section for a depreciating asset if, in the period beginning on 12 March 2020 and ending on 30 June 2021, you:
(a) start to hold the asset; and
(b) start to use it, or have it installed ready for use, for a taxable purpose.
Note: Section 328‑182 provides similar accelerated depreciation for small business entities that choose to use Subdivision 328‑D of the Income Tax Assessment Act 1997.
Exception—commitments already entered into
(2) Despite subsection (1), you are not covered by this section for the asset if, before 12 March 2020, you:
(a) entered into a contract under which you would hold the asset; or
(b) started to construct the asset; or
(c) started to hold the asset in some other way.
(3) Despite subsection (1), you are not covered by this section for an asset (the post‑12 March 2020 asset) if:
(a) on a day before 12 March 2020, you:
(i) enter into a contract under which you hold an asset on that day, or will hold the asset on a later day; or
(ii) start to construct an asset; or
(iii) start to hold an asset in some other way; and
(b) on a day on or after 12 March 2020 (the conduct day), you engage in conduct that results in you:
(i) entering into a contract under which you hold the post‑12 March 2020 asset on the conduct day, or will hold that asset on an even later day; or
(ii) starting to construct the post‑12 March 2020 asset; or
(iii) starting to hold the post‑12 March 2020 asset in some other way; and
(c) the post‑12 March 2020 asset is the asset mentioned in paragraph (a), or an identical or substantially similar asset; and
(d) you engage in that conduct for the purpose, or for purposes that include the purpose, of becoming covered by this section for the post‑12 March 2020 asset.
(4) For the purposes of subsections (2) and (3), treat yourself as having started to construct an asset at a time if you first incur expenditure in respect of the construction of the asset at that time.
(5) To avoid doubt, for the purposes of this section, you do not enter into a contract under which you hold an asset merely because you acquire an option to enter into such a contract.
(6) For the purposes of subsections (2), (3), (4) and (5), if a partner in a partnership does any of the following things, treat the partnership (instead of the partner) as having done the thing:
(a) entering into a contract under which the partnership would hold the asset;
(b) starting to construct the asset;
(c) acquiring an option to enter into such a contract.
Exception—second hand assets
(7) Despite subsection (1), you are not covered by this section for the asset if:
(a) another entity held the asset when it was first used, or first installed ready for use, other than:
(i) as trading stock; or
(ii) merely for the purposes of reasonable testing or trialling; or
(b) you started holding the asset under section 40‑115 of the Income Tax Assessment Act 1997 (about splitting a depreciating asset) or section 40‑125 of that Act (about merging depreciating assets); or
(c) you were already covered by this section for the asset as a member of a consolidated group or a MEC group of which you are no longer a member.
(7A) The exception in subsection (7) also applies in relation to an asset if:
(a) the asset is a licence (including a sub‑licence) relating to an intangible asset; and
(b) the exception in that subsection applies in relation to the intangible asset.
(8) However, paragraph (7)(a) does not apply in relation to an intangible asset unless the asset was used for the purpose of producing ordinary income before you first used it, or had it installed ready for use, for any purpose. In applying this subsection, disregard ordinary income that arises as a result of the disposal of the asset to you.
Exception—assets to which Division 40 does not apply
(9) Despite subsection (1), you are not covered by this section for the asset if Division 40 of the Income Tax Assessment Act 1997 does not apply to the asset because of section 40‑45 of that Act.
Exception—assets not located in Australia
(10) Despite subsection (1), you are not covered by this section for the asset if, at the time you first use the asset, or have it installed ready for use, for a taxable purpose:
(a) it is not reasonable to conclude that you will use the asset principally in Australia for the principal purpose of carrying on a business; or
(b) it is reasonable to conclude that the asset will never be located in Australia.
40‑130 Method for working out accelerated decline in value
(1) For the purposes of section 40‑120, the decline in value for the income year in which paragraph 40‑120(1)(a) is satisfied (the current year) is:
(a) if the asset’s start time occurs in the current year—the amount worked out under subsection (2); or
(b) if the asset’s start time occurred in an earlier year—the amount worked out under subsection (4).
Note 1: The asset’s start time is when you first use it, or have it installed ready for use, for any purpose (including a non‑taxable purpose): see subsection 40‑60(2) of the Income Tax Assessment Act 1997.
Note 2: A case covered by paragraph (b) is where you start to hold the asset in the period 12 March 2020 to 30 June 2020 and use it for only non‑taxable purposes in that period, then first use it for a taxable purpose in the period 1 July 2020 to 30 June 2021.
Current year is the year the asset starts to decline in value
(2) If this subsection applies, the amount for the current year is the sum of the following amounts:
(a) 50% of the asset’s cost as at the end of the current year, disregarding any amount included in the second element of the asset’s cost after 30 June 2021;
(b) the amount that would be the asset’s decline in value for the current year under Division 40 of the Income Tax Assessment Act 1997, assuming its cost were reduced by the amount worked out under paragraph (a).
Note: Paragraph (a) effectively only requires you to disregard an amount included in the second element of cost if you have a substituted accounting period that ends after 30 June 2021.
(3) However, the amount worked out under subsection (2) for an income year cannot be more than the amount that is the asset’s cost for the year.
Asset had declined in value before the start of the current year
(4) If this subsection applies, the amount for the current year is the sum of the following amounts:
(a) 50% of the sum of the asset’s opening adjustable value for the current year and any amount included in the second element of its cost for that year, disregarding any amount included in that second element after 30 June 2021;
(b) the amount that would be the asset’s decline in value for the current year under Division 40 of the Income Tax Assessment Act 1997 assuming:
(i) for the diminishing value method—its base value were reduced by the amount worked out under paragraph (a); or
(ii) for the prime cost method—the component “Asset’s *cost” in the formula in subsection 40‑75(1) of that Act (as adjusted under that section) were reduced by the amount worked out under paragraph (a).
Note: Paragraph (a) effectively only requires you to disregard an amount included in the second element of cost if you have a substituted accounting period that ends after 30 June 2021.
(5) However, the amount worked out under subsection (4) for an income year cannot be more than:
(a) for the diminishing value method—the asset’s base value for the year; or
(b) for the prime cost method—the sum of its opening adjustable value for the income year and any amount included in the second element of its cost for that year.
40‑135 Division 40 of the Income Tax Assessment Act 1997 applies to later years
(1) The decline in value of a depreciating asset is not worked out under this Subdivision for an income year if this Subdivision already applied in working out the decline in value of the asset for an income year.
(2) For an income year later than the year in which the decline in value is worked out under this Subdivision, the decline in value is worked out under the other provisions of Division 40 of the Income Tax Assessment Act 1997.
Adjustment required for prime cost method
(3) If you use the prime cost method for the asset, you must adjust the formula in subsection 40‑75(1) of the Income Tax Assessment Act 1997 for the later year in the manner set out in subsection 40‑75(3) of that Act. The later year is the change year referred to in that subsection.
Balancing adjustment provisions
(4) Subdivision 40‑D of the Income Tax Assessment Act 1997 has effect as if the decline in value worked out under this Subdivision had been worked out under Subdivision 40‑B of that Act.
40‑137 Choice to not apply this Subdivision to an asset
(1) You may choose that the decline in value of a particular depreciating asset for an income year, and subsequent income years, is not to be worked out under this Subdivision.
(2) The choice must be in the approved form.
(3) The choice cannot be revoked.
(4) You must give the choice to the Commissioner by the day you lodge your income tax return for the first income year to which the choice relates.
Note: The Commissioner may defer the time for giving the choice: see section 388‑55 in Schedule 1 to the Taxation Administration Act 1953.
Subdivision 40‑BB—Temporary full expensing of depreciating assets
Table of sections
40‑140 Definitions
40‑145 Interaction with other provisions
40‑150 When an asset of yours qualifies for full expensing
40‑155 Businesses with turnover under $5 billion
40‑157 Corporate tax entities with income under $5 billion
40‑160 Full expensing of first and second element of cost for post‑2020 budget assets
40‑165 Exclusions—entities covered by section 40‑155 or 40‑157
40‑167 Exclusions—entities covered by section 40‑157
40‑170 Full expensing of eligible second element of cost
40‑175 When is an amount included in the eligible second element
40‑180 Division 40 of the Income Tax Assessment Act 1997 applies to later years
40‑185 Balancing adjustment for assets not used or located in Australia
40‑190 Choice to not apply this Subdivision to an asset for an income year
40‑140 Definitions
In this Subdivision:
2020 budget time means 7.30 pm, by legal time in the Australian Capital Territory, on 6 October 2020.
40‑145 Interaction with other provisions
If this Subdivision applies to work out the decline in value of a depreciating asset you hold for an income year, no other provision of this Act or the Income Tax Assessment Act 1997 applies to work out that decline in value.
40‑150 When an asset of yours qualifies for full expensing
(1) For the purposes of this Subdivision, you are covered by this section for a depreciating asset if, on or before 30 June 2023:
(a) you start to hold the asset; and
(b) you start to use the asset, or have it installed ready for use, for a taxable purpose.
Exception—assets to which Division 40 does not apply
(2) Despite subsection (1), you are not covered by this section for the asset if Division 40 of the Income Tax Assessment Act 1997 does not apply to the asset because of section 40‑45 of that Act.
Exception—assets not used or located in Australia
(3) Despite subsection (1), you are not covered by this section for the asset if, at the time you first use the asset, or have it installed ready for use, for a taxable purpose:
(a) it is not reasonable to conclude that you will use the asset principally in Australia for the principal purpose of carrying on a business; or
(b) it is reasonable to conclude that the asset will never be located in Australia.
Exception—assets for which the decline in value is worked out under Subdivision 40‑E or 40‑F of the Income Tax Assessment Act 1997
(4) Despite subsection (1), you are not covered by this section for the asset if:
(a) the asset is allocated to a low‑value pool, or expenditure on the asset is allocated to a software development pool (see Subdivision 40‑E of the Income Tax Assessment Act 1997); or
(b) you or another taxpayer has deducted or can deduct amounts for the asset under Subdivision 40‑F of the Income Tax Assessment Act 1997 (about primary production depreciating assets).
40‑155 Businesses with turnover under $5 billion
This section covers you for an income year if:
(a) you are a small business entity for the income year; or
(b) you would be a small business entity for the income year if:
(i) each reference in Subdivision 328‑C of the Income Tax Assessment Act 1997 (about what is a small business entity) to $10 million were instead a reference to $5 billion; and
(ii) the reference in paragraph 328‑110(5)(b) of that Act to a small business entity were instead a reference to an entity covered by this section.
40‑157 Corporate tax entities with income under $5 billion
(1) This section covers you for an income year if:
(a) you are a corporate tax entity at any time in the income year; and
(b) any of the following amounts is less than $5 billion:
(i) the sum of your ordinary income (if any) and statutory income (if any) for the 2018‑19 income year;
(ii) if the 2019‑20 income year ends on or before 6 October 2020—the sum of your ordinary income (if any) and statutory income (if any) for the 2019‑20 income year; and
(c) the sum of the amounts worked out under subsection (3) for the 2016‑17, 2017‑18 and 2018‑19 income years exceeds $100 million.
(2) For the purposes of paragraph (1)(b), disregard non‑assessable non‑exempt income.
(3) The amount under this subsection for an income year is worked out as follows:
(a) firstly, identify each depreciating asset (other than an intangible asset) that:
(i) you hold at any time in the income year; and
(ii) you started to use, or have installed ready for use, for a taxable purpose in the income year;
(b) next, work out the cost of each of those assets (including any amounts included in the second element of the asset’s cost at a time that is in the income year);
(c) finally, work out the total of those costs.
(4) For the purposes of subsection (3), disregard an asset if, at the time you first used the asset, or had it installed ready for use, for a taxable purpose:
(a) it was not reasonable to conclude that you would use the asset principally in Australia for the principal purpose of carrying on a business; or
(b) it was reasonable to conclude that the asset would never be located in Australia.
(5) For the purposes of paragraph (3)(b), to work out the cost of a depreciating asset that is capital works (see section 43‑20 of the Income Tax Assessment Act 1997):
(a) disregard section 40‑45 of that Act and work out the cost of the capital works using Subdivision 40‑C of that Act; and
(b) disregard section 40‑215 of that Act.
40‑160 Full expensing of first and second element of cost for post‑2020 budget assets
(1) For the purposes of Division 40 of the Income Tax Assessment Act 1997, the decline in value of a depreciating asset you hold for an income year (the current year) is the amount worked out under subsection (3) if:
(a) you start to hold the asset at or after the 2020 budget time; and
(b) you start to use the asset, or have it installed ready for use, for a taxable purpose in the current year; and
(c) you are covered by section 40‑150 for the asset; and
(d) you are covered for the current year by any of the following:
(i) section 40‑155 (about businesses with turnover under $5 billion);
(ii) section 40‑157 (about corporate tax entities with income under $5 billion); and
(e) no balancing adjustment event happens to the asset in the current year; and
(f) you have not made a choice under section 40‑190 in relation to the current year.
Exclusions
(2) However, this section does not apply if:
(a) where section 40‑155 covers you for the current year (regardless whether section 40‑157 also covers you for the current year)—an exclusion applies to you and the asset for the current year under section 40‑165 (about exclusions for businesses with turnover of $50 million or more); or
(b) where section 40‑157 covers you for the current year (but section 40‑155 does not):
(i) an exclusion applies to you and the asset for the current year under section 40‑165; or
(ii) an exclusion applies to you and the asset for the current year under section 40‑167 (about exclusions for corporate tax entities with income under $5 billion).
Amount of the decline in value
(3) The decline in value for the current year is:
(a) if the asset’s start time occurs in the current year—the asset’s cost as at the end of the current year, disregarding any amount included in the asset’s cost after 30 June 2023; or
(b) if the asset’s start time occurred in an earlier year—the sum of its opening adjustable value for the current year and any amount included in the second element of its cost for the current year, disregarding any amount included in the asset’s cost after 30 June 2023.
Note 1: The asset’s start time is when you first use it, or have it installed ready for use, for any purpose (including a non‑taxable purpose): see subsection 40‑60(2) of the Income Tax Assessment Act 1997.
Note 2: A case covered by paragraph (b) is where you start to hold the asset in the period 6 October 2020 to 30 June 2021 and use it for only non‑taxable purposes in that period, then first use it for a taxable purpose in the period 1 July 2021 to 30 June 2022.
40‑165 Exclusions—entities covered by section 40‑155 or 40‑157
(1) For the purposes of subsection 40‑160(2), an exclusion applies to you and an asset for an income year if:
(a) where paragraph 40‑160(2)(a) applies—section 40‑155 would not cover you for the income year if the reference in that section to $5 billion were instead a reference to $50 million; and
(b) any of the exclusions in this section applies in relation to the asset.
Exclusion—commitments already entered into
(2) This exclusion applies in relation to the asset if, before the 2020 budget time, you:
(a) entered into a contract under which you would hold the asset; or
(b) started to construct the asset; or
(c) started to hold the asset in some other way.
(3) This exclusion applies in relation to the asset (the post‑6 October 2020 asset) if:
(a) on a day before 6 October 2020, you:
(i) enter into a contract under which you hold an asset on that day, or will hold the asset on a later day; or
(ii) start to construct an asset; or
(iii) start to hold an asset in some other way; and
(b) on a day on or after 6 October 2020 (the conduct day), you engage in conduct that results in you:
(i) entering into a contract under which you hold the post‑6 October 2020 asset on the conduct day, or will hold that asset on an even later day; or
(ii) starting to construct the post‑6 October 2020 asset; or
(iii) starting to hold the post‑6 October 2020 asset in some other way; and
(c) the post‑6 October 2020 asset is the asset mentioned in paragraph (a), or an identical or substantially similar asset; and
(d) you engage in that conduct for the purpose, or for purposes that include the purpose, of satisfying paragraph 40‑160(1)(a) for the post‑6 October 2020 asset.
(4) For the purposes of subsections (2) and (3), treat yourself as having started to construct an asset at a time if you first incur expenditure in respect of the construction of the asset at that time.
(5) To avoid doubt, for the purposes of this section, you do not enter into a contract under which you hold an asset merely because you acquire an option to enter into such a contract.
(6) For the purposes of subsections (2), (3), (4) and (5), if a partner in a partnership does any of the following things, treat the partnership (instead of the partner) as having done the thing:
(a) entering into a contract under which the partnership would hold an asset;
(b) starting to construct an asset;
(c) acquiring an option to enter into such a contract.
Exclusion—second hand assets
(7) This exclusion applies in relation to the asset if:
(a) another entity held the asset when it was first used, or first installed ready for use, other than:
(i) as trading stock; or
(ii) merely for the purposes of reasonable testing or trialling; or
(b) you started holding the asset under section 40‑115 of the Income Tax Assessment Act 1997 (about splitting a depreciating asset) or section 40‑125 of that Act (about merging depreciating assets); or
(c) you already satisfied paragraph 40‑160(1)(a) of this Act for the asset as a member of a consolidated group or a MEC group of which you are no longer a member.
(8) The exclusion in subsection (7) also applies in relation to an asset if:
(a) the asset is a licence (including a sub‑licence) relating to an intangible asset; and
(b) the exclusion in that subsection applies in relation to the intangible asset.
(9) However, paragraph (7)(a) does not apply in relation to an intangible asset unless the asset was used for the purpose of producing ordinary income before you first used it, or had it installed ready for use, for any purpose. In applying this subsection, disregard ordinary income that arises as a result of the disposal of the asset to you.
40‑167 Exclusions—entities covered by section 40‑157
(1) For the purposes of subsections 40‑160(2) and 40‑170(1A), an exclusion applies to you and an asset for an income year if any of the exclusions in this section applies in relation to the asset.
Exclusion—intangible assets
(2) This exclusion applies in relation to the asset if the asset is an intangible asset.
Exclusion—assets previously held by associates
(3) This exclusion applies in relation to the asset if it had been previously held by an associate of yours.
Exclusion—assets available for use by associates or foreign residents
(4) This exclusion applies in relation to the asset if the asset is available for use, at any time in the income year, by any of the following:
(a) an associate of yours;
(b) an entity that is a foreign resident.
40‑170 Full expensing of eligible second element of cost
(1) For the purposes of Division 40 of the Income Tax Assessment Act 1997, the decline in value of a depreciating asset you hold for an income year (the current year) is the amount worked out under this section if:
(a) either:
(i) you start to use the asset, or have it installed ready for use, for a taxable purpose in the current year; or
(ii) you started to use the asset, or have it installed ready for use, for a taxable purpose in an earlier income year; and
(b) you are covered by section 40‑150 for the asset; and
(c) you are covered for the current year by any of the following:
(i) section 40‑155 (about businesses with turnover under $5 billion);
(ii) section 40‑157 (about corporate tax entities with income under $5 billion); and
(d) the eligible second element worked out under section 40‑175 for the asset for the year is greater than nil; and
(e) no balancing adjustment event happens to the asset in the current year; and
(f) you have not made a choice under section 40‑190 in relation to the current year.
Exclusions
(1A) However, this section does not apply if:
(a) section 40‑157 covers you for the current year (but section 40‑155 does not); and
(b) an exclusion applies to you and the asset for the current year under section 40‑167 (about exclusions for corporate tax entities with income under $5 billion).
Amount of the decline in value
(2) The decline in value of the asset for the current year is:
(a) if the asset’s decline in value for the year would, apart from section 40‑145, be worked out under section 40‑82 of the Income Tax Assessment Act 1997—the amount worked out under subsection (3); or
(b) if the asset’s decline in value for the year would, apart from section 40‑145, be worked out under Subdivision 40‑BA of this Act—the amount worked out under subsection (4); or
(c) otherwise—the amount worked out under subsection (5).
Assets affected by section 40‑82 of the Income Tax Assessment Act 1997 (about assets costing less than $150,000, medium sized businesses)
(3) If this subsection applies, the amount for the current year is the sum of:
(a) the amount that would be the asset’s decline in value for the year under section 40‑82 of the Income Tax Assessment Act 1997, assuming the reference in subparagraph 40‑82(3A)(b)(ii) of that Act to 31 December 2020 were instead a reference to the 2020 budget time; and
(b) the eligible second element worked out under section 40‑175 of this Act for the asset for the year.
Assets affected by Subdivision 40‑BA (backing business investment)
(4) If this subsection applies, the amount for the current year is the sum of:
(a) the amount that would be worked out under paragraph 40‑130(2)(a) or (4)(a) (whichever is applicable) for the year, assuming the references in paragraphs 40‑130(2)(a) and (4)(a) to 30 June 2021 were instead references to the 2020 budget time; and
(b) the eligible second element worked out under section 40‑175 for the asset for the year; and
(c) the amount that would be worked out under paragraph 40‑130(2)(b) or (4)(b) (whichever is applicable) for the year, assuming the references in paragraphs 40‑130(2)(b) and (4)(b) to “the amount worked out under paragraph (a)” were instead references to “the amounts worked out under paragraphs 40‑170(4)(a) and (b)”.
Other assets
(5) If this subsection applies, the amount for the current year is the sum of:
(a) the amount that would be the asset’s decline in value for the year under Division 40 of the Income Tax Assessment Act 1997, disregarding any amounts included in the eligible second element worked out under section 40‑175 of this Act for the asset for the year; and
(b) the eligible second element worked out under section 40‑175 for the asset for the year.
40‑175 When is an amount included in the eligible second element
The amount worked out under this section (the eligible second element) for a depreciating asset for an income year is the sum of any amounts included in the second element of the asset’s cost at a time that is in both of the following periods:
(a) the income year;
(b) the period beginning at the 2020 budget time and ending on 30 June 2023.
40‑180 Division 40 of the Income Tax Assessment Act 1997 applies to later years
(1) For an income year later than a year in which the decline in value is worked out under this Subdivision, the decline in value is worked out under the other provisions of Division 40 of the Income Tax Assessment Act 1997.
Adjustment required for prime cost method
(2) If you use the prime cost method for the asset, you must adjust the formula in subsection 40‑75(1) of the Income Tax Assessment Act 1997 for the later year in the manner set out in subsection 40‑75(3) of that Act. The later year is the change year referred to in that subsection.
Balancing adjustment provisions
(3) Subdivision 40‑D of the Income Tax Assessment Act 1997 has effect as if the decline in value worked out under this Subdivision had been worked out under Subdivision 40‑B of that Act.
40‑185 Balancing adjustment for assets not used or located in Australia
(1) This section applies if the decline in value for a depreciating asset for an income year is worked out under this Subdivision, and at a time (the balancing adjustment time) in a later income year:
(a) either:
(i) it becomes not reasonable to conclude that you will use the asset principally in Australia for the principal purpose of carrying on a business; or
(ii) it becomes reasonable to conclude that the asset will never be located in Australia; and
(b) none of the requirements in paragraphs 40‑295(1)(a), (b) or (c) of the Income Tax Assessment Act 1997 are satisfied in relation to the asset.
Balancing adjustment event and termination value
(2) For the purposes of Subdivision 40‑D of the Income Tax Assessment Act 1997 assume that, at the balancing adjustment time, you stop using the asset, or having it installed ready for use, for any purpose and you expect never to use it, or have it installed ready for use, again.
Cost resulting from balancing adjustment event
(3) For the purposes of section 40‑180 of the Income Tax Assessment Act 1997 assume that the reference in item 3 of the table in subsection 40‑180(2) of that Act to “because you stop using it for any purpose expecting never to use it again” were instead a reference to “because of section 40‑185 of the Income Tax (Transitional Provisions) Act 1997”.
Subdivision does not apply for income year after balancing adjustment event
(4) If a balancing adjustment event happens to a depreciating asset you hold because of this section, this Subdivision cannot apply to work out the decline in value of the asset for a later income year.
40‑190 Choice to not apply this Subdivision to an asset for an income year
(1) You may choose that the decline in value of a particular depreciating asset for an income year is not to be worked out under this Subdivision.
(2) The choice must be in the approved form.
(3) The choice cannot be revoked.
(4) You must give the choice to the Commissioner by the day you lodge your income tax return for the income year to which the choice relates.
Note: The Commissioner may defer the time for giving the choice: see section 388‑55 in Schedule 1 to the Taxation Administration Act 1953.
Subdivision 40‑C—Cost
Table of sections
40‑230 Car limit
40‑230 Car limit
(1) Division 40 of the new Act applies as if references in that Division to the car limit included references to:
(a) the car depreciation limit under Division 42 of the former Act; and
(b) the motor vehicle depreciation limit under former section 57AF of the Income Tax Assessment Act 1936.
(2) If you:
(a) have a substituted accounting period; and
(b) start to hold a car in your 2001‑02 income year but before 1 July 2001;
you must use as the car limit the car depreciation limit under section 42‑80 of the former Act for the 2000‑01 financial year.
Subdivision 40‑D—Balancing adjustments
Table of sections
40‑285 Balancing adjustments
40‑287 Disposal of pre‑1 July 2001 mining depreciating asset to associate
40‑288 Disposal of pre‑1 July 2001 mining non‑depreciating asset to associate
40‑289 Surrendered firearms
40‑290 Reduction of deductions under former Act etc.
40‑292 Balancing adjustment—assets used for both general tax purposes and R&D activities
40‑293 Balancing adjustment—partnership assets used for both general tax purposes and R&D activities
40‑295 Later year relief
40‑340 Roll‑overs
40‑345 Balancing adjustments for depreciating assets that retain CGT indexation
40‑365 Involuntary disposals
40‑285 Balancing adjustments
(1) Paragraphs 40‑285(1)(a) and (2)(a) of the new Act have effect in relation to a depreciating asset that you held at 1 July 2001 as if amounts you have deducted or can deduct for the asset under the former Act or the Income Tax Assessment Act 1936 were part of the asset’s decline in value under Division 40.
(2) You are entitled to a further deduction under subsection (3) if:
(a) you are entitled to a deduction under subsection 40‑285(2) of the new Act for a balancing adjustment event happening to a depreciating asset:
(i) to which Division 58 of the former Act applied; or
(ii) to which former section 61A of the Income Tax Assessment Act 1936 applied, or for which the transition time under Division 57 in Schedule 2D to that Act occurred before 1 July 2001; and
(b) you would have been entitled to a further deduction under section 42‑197 of the former Act.
(3) The amount of the further deduction is the amount worked out under section 42‑197 of the former Act.
(4) Division 40 of the new Act applies to a balancing adjustment event that occurs on or after 1 July 2001 for a depreciating asset you hold if you held the asset on that day.
(5) The amount included in your assessable income under subsection 40‑285(1) or section 40‑370 of the new Act for a balancing adjustment event happening to a depreciating asset is reduced if:
(a) the asset is either:
(i) a depreciating asset that is not plant and that you started to hold under a contract entered into before 1 July 2001, you constructed where the construction started before that day or you started to hold in some other way before that day; or
(ii) plant that you acquired at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; and
(b) any capital gain or capital loss would be disregarded (if Part 3‑1 of the new Act applied):
(i) because of section 118‑5 (about cars, motor cycles and valour decorations); or
(ii) because of section 118‑10 (about collectables); or
(iii) because of section 118‑12 (about plant used to produce exempt income); or
(iv) because the asset was a pre‑CGT asset at the time of the balancing adjustment event.
(6) The reduction is:
where:
sum of reductions is the sum of the reductions in your deductions for the asset because you did not use it for a particular purpose.
total decline is the decline in value of the depreciating asset since you started to hold it.
(7) Section 118‑24 of the new Act applies to CGT event A1 (disposal of a CGT asset) happening to a depreciating asset if the event happens:
(a) if the depreciating asset is plant—at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; or
(b) if the depreciating asset is not plant—before 1 July 2001;
where:
(c) the time of the event is when you entered into the contract for the disposal of the asset; and
(d) the change in ownership constituting the disposal occurred after the applicable time mentioned in paragraph (a) or (b).
40‑287 Disposal of pre‑1 July 2001 mining depreciating asset to associate
(1) This section applies if:
(a) on or after 1 July 2001, a company (the transferor) disposes of a depreciating asset to another company; and
(b) the companies are members of the same linked group at the time of the disposal; and
(c) apart from this section, the disposal would have resulted in:
(i) an amount (the included amount) being included in the assessable income of the transferor under subsection 40‑285(1) of the Income Tax Assessment Act 1997; and
(ii) the transferor having an additional decline in value (the deductible amount) under subsection 40‑35(5), 40‑38(5) or 40‑40(4) of this Act; and
(d) the included amount is more than the deductible amount.
(2) Subsection 40‑35(5), 40‑38(5) or 40‑40(4) of this Act does not apply to the disposal.
(3) The amount that is included in the transferor’s assessable income under subsection 40‑285(1) of the Income Tax Assessment Act 1997 is the included amount reduced by the deductible amount.
40‑288 Disposal of pre‑1 July 2001 mining non‑depreciating asset to associate
(1) This section applies if:
(a) on or after 1 July 2001, a company (the transferor) disposes of property that is not a depreciating asset to another company; and
(b) the companies are members of the same linked group at the time of the disposal; and
(c) apart from this section, the disposal would have resulted in the transferor having an additional decline in value (the deductible amount) under subsection 40‑35(5), 40‑37(5), 40‑40(4) or 40‑43(4) of this Act; and
(d) the sum of:
(i) the money the transferor receives, or is entitled to receive, in respect of the disposal; and
(ii) the market value of any other property the transferor receives, or is entitled to receive, in respect of the disposal;
is more than the deductible amount.
(2) There is no additional decline in value of the notional asset referred to in subsection 40‑35(5), 40‑37(5), 40‑40(4) or 40‑43(4) as a result of the disposal.
(3) Any amount that would be included in the transferor’s assessable income under subsection 40‑35(6), 40‑37(6), 40‑38(6), 40‑40(5) or 40‑43(5) of this Act, or subsection 40‑830(6) of the Income Tax Assessment Act 1997, as a result of the disposal is reduced by the deductible amount.
40‑289 Surrendered firearms
If a balancing adjustment event for a firearm that you hold occurs because you surrender it after the commencement of this section under firearms surrender arrangements, any amount by which its termination value exceeds its adjustable value is not included in your assessable income under subsection 40‑285(1) of the Income Tax Assessment Act 1997.
40‑290 Reduction of deductions under former Act etc.
Subsection 40‑290(2) of the new Act has effect in relation to a depreciating asset that you held at 1 July 2001 as if:
(a) any amount by which your deductions for the asset were reduced under the former Act or the Income Tax Assessment Act 1936 because you did not use it for a particular purpose were an amount by which your deductions for the asset were reduced under section 40‑25 of the new Act; and
(b) the total decline element of the formula in that subsection included all amounts you have deducted or can deduct for the asset under the former Act or the Income Tax Assessment Act 1936.
40‑292 Balancing adjustment—assets used for both general tax purposes and R&D activities
R&D entity has old law R&D decline in value deductions
(1) This section applies to an R&D entity if:
(a) a balancing adjustment event happens in an income year (the event year) commencing on or after 1 July 2011 for an asset held by the R&D entity and:
(i) the R&D entity can deduct, for an income year, an amount under section 40‑25 of the Income Tax Assessment Act 1997 (the new Act), as that section applies apart from Division 355 of that Act and former section 73BC of the Income Tax Assessment Act 1936 (the old Act); or
(ii) the R&D entity could have deducted, for an income year, an amount as described in subparagraph (i) if it had used the asset; and
(b) either or both of the following subparagraphs apply:
(i) the R&D entity can deduct (the old law deductions) under former section 73BA or 73BH of the old Act an amount for one or more income years for the asset;
(ii) the R&D entity chooses tax offsets under former section 73I of the old Act instead of deductions (also the old law deductions) under those former sections for one or more income years for the asset.
Note: This section applies even if the R&D entity is entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions under section 355‑305 of that Act for the asset.
Section 40‑290 to be applied as if use for carrying on R&D activities were use for a taxable purpose
(2) In applying section 40‑290 of the new Act (including references in that section to the reduction of deductions under section 40‑25 of that Act) in relation to the asset, assume that using the asset for a taxable purpose includes using it for:
(a) the purpose of the carrying on, by or on behalf of the R&D entity, of the research and development activities (within the meaning of former section 73B of the old Act) to which the old law deductions relate; or
(b) if the R&D entity is entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions (the new law deductions) under section 355‑305 of that Act for the asset—the purpose of conducting the R&D activities to which the new law deductions relate.
Increase in amounts deductible or assessable under section 40‑285
(3) Any amount (the section 40‑285 amount):
(a) that the R&D entity can deduct for the asset under section 40‑285 of the new Act (after applying subsection (2) of this section) for the event year; or
(b) that is included in the R&D entity’s assessable income for the asset under section 40‑285 of the new Act (after applying subsection (2) of this section) for the event year;
is taken to be increased under section 40‑292 of the new Act by the following amount:
where:
adjusted section 40‑285 amount means:
(a) if the section 40‑285 amount is a deduction—the amount of the deduction; or
(b) if the section 40‑285 amount is an amount included in the R&D entity’s assessable income—so much of the section 40‑285 amount as does not exceed the total decline in value.
old law 1.25 rate deductions means the sum of the R&D entity’s notional Division 40 deductions, and notional Division 42 deductions, (if any) for the asset that were multiplied by 1.25 in working out the old law deductions.
total decline in value means the cost of the asset less its adjustable value.
Application of Division 355
(3A) In applying Division 355 of the new Act in relation to the asset for the income year, the R&D entity is taken to have:
(a) if the section 40‑285 amount is an amount included in the R&D entity’s assessable income—a clawback amount under section 355‑447 of the new Act for the income year; or
(b) if the section 40‑285 amount is a deduction—a catch up amount under section 355‑466 of the new Act for the income year;
equal to the following amount:
where:
adjusted section 40‑285 amount means:
(a) if the section 40‑285 amount is a deduction—the amount of the deduction; or
(b) if the section 40‑285 amount is an amount included in the R&D entity’s assessable income—so much of the section 40‑285 amount as does not exceed the total decline in value.
total decline in value means the cost of the asset less its adjustable value.
Normal rules do not apply for the asset and the event
(4) Neither of the following sections:
(a) section 40‑292 of the new Act (as amended by the Tax Laws Amendment (Research and Development) Act 2011);
(b) section 40‑292 of the new Act (as that section applies because of Part 2 of Schedule 4 to the Tax Laws Amendment (Research and Development) Act 2011);
to the extent that they would otherwise apply apart from this section to the R&D entity for the event, do so apply to the R&D entity for the event.
Note 1: The section 40‑292 of the new Act mentioned in paragraph (a) would otherwise apply for the event in a case where the R&D entity had new law deductions.
Note 2: The section 40‑292 of the new Act mentioned in paragraph (b) would otherwise apply for the event in respect of the old law deductions.
40‑293 Balancing adjustment—partnership assets used for both general tax purposes and R&D activities
Partners have old law R&D decline in value deductions
(1) This section applies to an R&D partnership if:
(a) a balancing adjustment event happens in an income year (the event year) commencing on or after 1 July 2011 for an asset held by the R&D partnership and:
(i) the R&D partnership can deduct, for an income year, an amount under section 40‑25 of the Income Tax Assessment Act 1997 (the new Act), as that section applies apart from Division 355 of that Act and former section 73BC of the Income Tax Assessment Act 1936 (the old Act); or
(ii) the R&D partnership could have deducted, for an income year, an amount as described in subparagraph (i) if it had used the asset; and
(b) either or both of the following subparagraphs apply:
(i) one or more partners of the R&D partnership can deduct (the old law deductions) under former section 73BA or 73BH of the old Act amounts for one or more income years for the asset;
(ii) one or more partners of the R&D partnership choose tax offsets under former section 73I of the old Act instead of deductions (also the old law deductions) under those former sections for one or more income years for the asset.
Note: This section applies even if the partners are entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions under section 355‑520 of that Act for the asset.
Section 40‑290 to be applied as if use for carrying on R&D activities were use for a taxable purpose
(2) In applying section 40‑290 of the new Act (including references in that section to the reduction of deductions under section 40‑25 of that Act) in relation to the asset, assume that using the asset for a taxable purpose includes using it for:
(a) the purpose of the carrying on, by or on behalf of the R&D partnership, of the research and development activities (within the meaning of former section 73B of the old Act) to which the old law deductions relate; or
(b) if one or more partners of the R&D partnership are entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions (the new law deductions) under section 355‑520 of that Act for the asset—the purpose of conducting the R&D activities to which the new law deductions relate.
Increase in amounts deductible or assessable under section 40‑285
(3) Any amount (the section 40‑285 amount):
(a) that the R&D partnership can deduct for the asset under section 40‑285 of the new Act (after applying subsection (2) of this section) for the event year; or
(b) that is included in the R&D partnership’s assessable income for the asset under section 40‑285 of the new Act (after applying subsection (2) of this section) for the event year;
is taken to be increased under section 40‑293 of the new Act by the following amount:
where:
adjusted section 40‑285 amount means:
(a) if the section 40‑285 amount is a deduction—the amount of the deduction; or
(b) if the section 40‑285 amount is an amount included in the R&D partnership’s assessable income—so much of the section 40‑285 amount as does not exceed the total decline in value.
old law 1.25 rate deductions means the sum of the partners’ notional Division 40 deductions, and notional Division 42 deductions, (if any) for the asset that were multiplied by 1.25 in working out the old law deductions.
total decline in value means the cost of the asset less its adjustable value.
Application of Division 355
(3A) In applying Division 355 of the new Act in relation to the asset for the income year, an R&D entity (the partner) that is a partner in the R&D partnership and is entitled to one or more new law deductions for one or more income years for the asset, is taken to have:
(a) if the section 40‑285 amount is an amount included in the R&D partnership’s assessable income—a clawback amount under section 355‑449 of the new Act for the income year; or
(b) if the section 40‑285 amount is a deduction—a catch up amount under section 355‑468 of the new Act for the income year;
equal to the partner’s proportion of the following amount:
where:
adjusted section 40‑285 amount means:
(a) if the section 40‑285 amount is a deduction—the amount of the deduction; or
(b) if the section 40‑285 amount is an amount included in the R&D partnership’s assessable income—so much of the section 40‑285 amount as does not exceed the total decline in value.
sum of new law deductions means the sum of each partner’s new law deductions mentioned in paragraph (2)(b) of this section.
total decline in value means the cost of the asset less its adjustable value.
Normal rules do not apply for the asset and the event
(4) Section 40‑293 of the new Act, to the extent that it would otherwise apply apart from this section to the R&D partnership or its partners for the event, does not so apply to the R&D partnership and the partners for the event.
Note: Section 40‑293 of the new Act would otherwise apply for the event in a case where the partners had new law deductions.
40‑295 Later year relief
(1) You may exclude an amount that has been included in your assessable income for plant as a result of a balancing adjustment event that occurred in your 1999‑2000 or 2000‑01 income year to the extent that you choose under section 42‑290 of the former Act to treat that amount as an amount you have deducted for the decline in value of replacement plant.
(2) You can only make this choice for the replacement plant if:
(a) you acquire it:
(i) within 2 income years after the end of the income year in which the balancing adjustment event occurred; and
(ii) in your 2001‑02 or 2002‑2003 income year; and
(b) at the end of the income year in which you acquired it, you used it, or had it installed ready for use, wholly for the purpose of producing assessable income; and
(c) you can deduct an amount for its decline in value; and
(d) you had not made a choice under section 42‑285 or 42‑293 of the former Act for the balancing adjustment event.
(3) The adjustable value of the replacement plant is reduced by the amount covered by the choice as at the first day of the income year in which you acquired it.
40‑340 Roll‑overs
(1) This section applies to an entity (the transferee) if:
(a) there is roll‑over relief under section 40‑340 of the new Act as a result of a balancing adjustment event happening to plant; and
(b) the transferor referred to in that section was working out the decline in value of the plant under subsection 40‑10(3) or 40‑12(3) of this Act.
Plant acquired before 21 September 1999
(2) The transferee works out the decline in value of the plant under subsection 40‑10(3) or 40‑12(3) of this Act using the same method as the transferor if:
(a) the transferor started to hold the plant under a contract entered into at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; or
(b) the transferor constructed it and the construction started at or before that time; or
(c) the transferor acquired it in some other way at or before that time; or
(d) the transferor acquired it from an entity that was working out the decline in value of the plant under subsection 40‑10(3) or 40‑12(3) of this Act and paragraph (a), (b) or (c) of this subsection applied to that entity or to the earliest successive transferor.
Small business taxpayers
(3) The transferee also works out the decline in value of the plant under subsection 40‑10(3) or 40‑12(3) of this Act using the same method as the transferor if:
(a) the plant was not acquired as mentioned in subsection (2); and
(b) the transferor, or an earlier successive transferor, was using a rate for the plant under subsection 42‑160(1) or 42‑165(1) of the former Act; and
(c) the conditions set out in this table are satisfied:
Conditions for small business taxpayers retaining accelerated rates |
Item | Condition |
1 | The transferee must have been a small business taxpayer for the income year (the start year) that includes the time when the entity first used the plant, or first had it installed ready for use. |
2 | At that time, at least 50% of the transferee’s intended use of the plant must be in carrying on a business for the purpose of producing assessable income. |
3 | At that time, neither of these applies: (a) it could reasonably be expected that, because of the plant’s use, whether in connection with another asset or not, the transferee would not be a small business taxpayer for the income year following the start year or for either of the next 2 income years; (b) the plant is being or is intended to be let predominantly on a lease of a kind specified in subsection (5). |
(4) For the purposes of item 2 in the table in subsection (3), an entity is treated as if it is not carrying on a business in relation to the activities of a partnership in which the entity is a partner unless the entity is connected with the partnership.
(5) A lease of plant referred to in item 3 of the table in subsection (3) is an agreement (including a renewal of an agreement) under which the holder of the plant grants a right to use the plant to another entity, but not a hire purchase agreement or a short‑term hire agreement.
(6) The transferee works out the decline in value of the plant by:
(a) for the diminishing value method—replacing the component in the formula in subsection 40‑70(1) of the new Act that includes the plant’s effective life with the rate the transferor, or the earliest successive transferor, was using; or
(b) for the prime cost method:
(i) replacing the component in the formula in subsection 40‑75(1) of the new Act that includes the plant’s effective life with the rate the transferor, or the earliest successive transferor, was using; and
(ii) increasing the plant’s cost under Division 42 of the former Act by any amounts included in the second element of the plant’s cost after 30 June 2001.
Meaning of small business taxpayer
(7) An entity is a small business taxpayer for an income year if:
(a) the entity carries on a business in that year; and
(b) the entity’s average turnover for that year is less than $1,000,000.
Note: An entity is treated as carrying on a business if it is winding up a business and it was previously a small business taxpayer: see subsection (11).
Meaning of average turnover
(8) An entity’s average turnover for an income year (the current year) is:
where:
number of averaging years is:
(a) 3; or
(b) if the entity did not carry on a business in each of the current year and the 2 years before the current year, the number of those income years in which the entity carried on a business.
Note: An entity is treated as carrying on a business if it is winding up a business and it was previously a small business taxpayer: see subsection (11).
sum of relevant group turnovers is the sum of:
(a) the entity’s group turnover for the current year; and
(b) the entity’s group turnover (if any) for the 2 preceding income years.
Meaning of group turnover
(9) The group turnover of an entity (the primary entity) for an income year is the sum of:
(a) the value of the business supplies the primary entity made in the income year; and
(b) the value of the business supplies entities connected with the primary entity made in the income year;
reduced by:
(c) that part of the value of the business supplies the primary entity made in the income year that is attributable to supplies it made during the year to entities connected with it when they were connected with it; and
(d) that part of the value of the business supplies entities connected with the primary entity made in the income year that is attributable to supplies the connected entities made during the year to the primary entity when they were connected with it; and
(e) that part of the value of the business supplies another entity made in the income year that is attributable to supplies the other entity made to a third entity at a time when both the other entity and third entity were connected with the primary entity.
Value of business supplies
(10) The value of the business supplies an entity makes in an income year is the sum of:
(a) for taxable supplies (if any) the entity makes during the year in the course of carrying on a business—the value (as defined by section 9‑75 of the GST Act) of the supplies; and
(b) for other supplies the entity makes during the year in the course of carrying on a business—the prices (as defined by section 9‑75 of the GST Act) of the supplies.
Winding up a business
(11) Subsections (7) and (8) apply to an entity as if it carried on a business in an income year if:
(a) in that year the entity was winding up a business it previously carried on; and
(b) the entity was a small business taxpayer for the income year in which it stopped carrying on that business.
40‑345 Balancing adjustments for depreciating assets that retain CGT indexation
(1) The amount included in your assessable income under subsection 40‑285(1) or 104‑240(1) of the new Act as a result of a balancing adjustment event occurring for:
(a) plant that you acquired at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; or
(b) a depreciating asset that is not plant and that you acquired before 1 July 2001;
is reduced (but not below nil) if:
(c) for a paragraph (a) case—there would have been a reduction under subsection 42‑192(2) of the former Act as a result of that event; or
(d) for a paragraph (b) case—there would have been a reduction under subsection 42‑192(2) of the former Act as a result of that event if the asset were plant.
(2) The amount of the reduction is the amount worked out under subsection 42‑192(2) of the former Act.
(3) There is no reduction under subsection (1) to an amount included in your assessable income under subsection 104‑240(1) if the balancing adjustment event results in a discount capital gain under Division 115.
(4) However, you can choose not to make a reduction under subsection (1) and instead take advantage of the discount capital gain.
(5) Subsection (6) applies to an entity (the transferee) if there is roll‑over relief under section 40‑340 of the new Act as a result of a balancing adjustment event happening to a depreciating asset held by the transferee.
(6) Subsections (1), (2), (3) and (4) apply also to the transferee if:
(a) for a depreciating asset that is plant:
(i) the transferor referred to in section 40‑340 of the new Act started to hold the plant under a contract entered into at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; or
(ii) the transferor constructed it and the construction started at or before that time; or
(iii) the transferor acquired it in some other way at or before that time; or
(iv) the transferor acquired it from an entity that was working out the decline in value of the plant under subsection 40‑10(3) or 40‑12(3) of this Act and subparagraph (i), (ii) or (iii) of this paragraph applied to that entity or to the earliest successive transferor; or
(b) for a depreciating asset that is not plant:
(i) the transferor started to hold the asset under a contract entered into before 1 July 2001; or
(ii) the transferor constructed it and the construction started at or before that day; or
(iii) the transferor acquired it in some other way before that day.
40‑365 Involuntary disposals
Section 40‑365 of the new Act applies to a case where:
(a) a balancing adjustment event occurred for plant in the circumstances mentioned in subsection 42‑293(2) of the former Act before 1 July 2001; and
(b) you start to hold a replacement asset or assets after that day; and
(c) the conditions in subsections 40‑365(3) and (4) of the new Act are satisfied.
Subdivision 40‑E—Low‑value and software development pools
Table of sections
40‑420 Low‑value pools under Division 42 continue
40‑430 Allocating assets to low‑value pools
40‑450 Software development pools
40‑420 Low‑value pools under Division 42 continue
(1) A low‑value pool you created under Subdivision 42‑M of the former Act continues under the new Act as if it had been created under Subdivision 40‑E of the new Act.
(2) For the purposes of working out the decline in value of depreciating assets in such a pool for your income year in which 1 July 2001 occurs, step 3 of the method statement in subsection 40‑440(1) of the new Act applies to the pool closing balance, worked out under section 42‑470 of the former Act, for the income year before that year.
40‑430 Allocating assets to low‑value pools
For the purposes of Subdivision 40‑E of the Income Tax Assessment Act 1997, you cannot allocate a depreciating asset to a low‑value pool if:
(a) you can deduct an amount for the asset under former section 73BA of the Income Tax Assessment Act 1936; or
(b) you could so deduct an amount if you had not chosen a tax offset under former section 73I of that Act;
for a period before, or starting at the same time as, the allocation has effect.
40‑450 Software development pools
Subsection 40‑450(2) of the new Act has effect as if the reference to expenditure being allocated to a software development pool included a reference to expenditure being allocated to a software pool under Division 46 of the former Act.
Subdivision 40‑F—Primary production depreciating assets
Table of sections
40‑515 Water facilities, grapevines and horticultural plants
40‑520 Special rule for water facilities you no longer hold
40‑525 Amounts deducted for water facilities
40‑515 Water facilities, grapevines and horticultural plants
(1) This section applies to you if you have deducted or can deduct an amount under Division 387 of the former Act for an amount (the qualifying amount) of expenditure on any of these (the primary production asset):
(a) the construction, manufacture, installation or acquisition of a water facility; or
(b) the establishment of horticultural plants; or
(c) the establishment of grapevines;
and you would have been able to deduct amounts for the qualifying amount for the income year in which 1 July 2001 occurs under the former Act if it had continued to apply.
(2) Subdivision 40‑F of the new Act applies to the primary production asset on this basis:
(a) the qualifying amount is taken to be:
(i) for a water facility—the amount of capital expenditure you incurred on the construction, manufacture, installation or acquisition of the water facility; or
(ii) for a horticultural plant or a grapevine—the amount of capital expenditure incurred that is attributable to the establishment of the plant or grapevine; and
(b) for horticultural plants, you use the effective life determined under section 387‑175 of the former Act; and
(c) amounts that have been deducted or can be deducted for the qualifying amount under the former Act or the Income Tax Assessment Act 1936 are taken to be a decline in value under Subdivision 40‑F of the new Act.
40‑520 Special rule for water facilities you no longer hold
(1) This section applies to you if:
(a) you have deducted or can deduct an amount under Division 387 of the former Act for an amount (the qualifying amount) of expenditure on a water facility; and
(b) you do not hold the water facility at the start of 1 July 2001.
(2) Subdivision 40‑F of the new Act applies to the water facility on the basis specified in subsection 40‑515(2) of this Act, and no other taxpayer can deduct amounts for it under the new Act.
40‑525 Amounts deducted for water facilities
The reference in subsection 40‑555(1) of the new Act to a person having deducted or being able to deduct an amount under Subdivision 40‑F of the new Act for expenditure on a water facility includes a reference to the person having deducted or being able to deduct an amount for it under:
(a) Subdivision 387‑B of the former Act; or
(b) former section 75B of the Income Tax Assessment Act 1936.
Subdivision 40‑G—Capital expenditure of primary producers and other landholders
Table of sections
40‑645 Electricity supply and telephone lines
40‑650 Special rule for land that you no longer hold
40‑670 Farm consultants
40‑645 Electricity supply and telephone lines
(1) This section applies to you if you have deducted or can deduct an amount under Division 387 of the former Act for an amount (the qualifying amount) of expenditure on:
(a) connecting or upgrading the supply of mains electricity to land; or
(b) a telephone line on land;
and you hold the land to which the electricity or telephone line relates at the start of 1 July 2001.
(2) You deduct amounts for the qualifying amount under Subdivision 40‑G of the new Act in the same way you were writing it off under Division 387 of the former Act.
(3) A reference in subsection 40‑650(4), (5) or (7) of the new Act to an amount being deducted under Subdivision 40‑G of that Act includes a reference to an amount being deducted under:
(a) Subdivision 387‑F of the former Act; or
(b) former section 70 of the Income Tax Assessment Act 1936.
40‑650 Special rule for land that you no longer hold
(1) This section applies to you if:
(a) you have deducted or can deduct an amount under Division 387 of the former Act for an amount (the qualifying amount) of expenditure on connecting or upgrading the supply of mains electricity to land or a telephone line on land; and
(b) you do not hold the land to which the electricity or telephone line relates at the start of 1 July 2001.
(2) Subdivision 40‑G of the new Act applies to the qualifying amount on the basis specified in that Subdivision, and no other taxpayer can deduct amounts for it under the new Act.
40‑670 Farm consultants
A person approved as a farm consultant under Subdivision 387‑A of the former Act is taken to be approved as a farm consultant under section 40‑670 of the new Act.
Subdivision 40‑I—Capital expenditure that is deductible over time
Table of sections
40‑825 Genuine prospectors
40‑832 New method not to apply in some cases
40‑825 Genuine prospectors
The exemption provided by section 330‑60 of the former Act continues to apply to ordinary income derived before 20 August 2001.
40‑832 New method not to apply in some cases
If:
(a) on or after 10 May 2006 you abandon, sell or otherwise dispose of a project; and
(b) you have deducted or can deduct amounts for project amounts in relation to that project; and
(c) on or after that day, you start to operate that project again; and
(d) it is reasonable to conclude that you did this for the main purpose of ensuring that deductions for project amounts in relation to that project would be worked out under section 40‑832 of that Act;
the Income Tax Assessment Act 1997 applies to you as if the project had started to operate before 10 May 2006.
Subdivision 40‑J—Ships depreciated under section 57AM of the Income Tax Assessment Act 1936
Table of sections
40‑840 Ships depreciated under section 57AM of the Income Tax Assessment Act 1936
40‑840 Ships depreciated under section 57AM of the Income Tax Assessment Act 1936
(1) This section applies if:
(a) you have deducted or can deduct amounts for a ship under section 57AM of the Income Tax Assessment Act 1936 as in force before its repeal by Schedule 1 to the Tax Laws Amendment (Repeal of Inoperative Provisions) Act 2006; and
(b) you hold the ship when this section commences.
(2) Division 40 of the Income Tax Assessment Act 1997 applies to the ship after the commencement of this section.
(3) For the purposes of that application:
(a) the cost of the ship when this section commences is its cost under the Income Tax Assessment Act 1936 just before that time; and
(b) the ship’s adjustable value when this section commences is its depreciated value under the Income Tax Assessment Act 1936 just before that time; and
(c) paragraphs 40‑285(1)(a) and (2)(a) have effect as if amounts you have deducted or can deduct under section 57AM of the Income Tax Assessment Act 1936, as in force before its repeal, are taken to be part of the ship’s decline in value under Subdivision 40‑B of the Income Tax Assessment Act 1997.
Division 43—Deductions for capital works
Table of sections
43‑100 Application of Division 43 to quasi‑ownership rights over land
43‑105 Application of subsections 43‑50(1) and (2) to hotel buildings and apartment buildings
43‑110 Application of subsection 43‑75(3)
43‑100 Application of Division 43 to quasi‑ownership rights over land
Division 43 of the Income Tax Assessment Act 1997 applies to quasi‑ownership rights over land granted in respect of:
(a) capital works being a hotel building or an apartment building begun after 30 June 1997; and
(b) other capital works begun after 26 February 1992.
43‑105 Application of subsections 43‑50(1) and (2) to hotel buildings and apartment buildings
Subsections 43‑50(1) and (2) of the Income Tax Assessment Act 1997 do not apply to capital works being a hotel building or an apartment building begun before 1 July 1997.
43‑110 Application of subsection 43‑75(3)
Subsection 43‑75(3) of the Income Tax Assessment Act 1997 does not apply to capital works being a hotel building or an apartment building begun before 1 July 1997.
Division 45—Disposal of leases and leased plant
Table of sections
45‑1 Application of Division 45 of the Income Tax Assessment Act 1997
45‑3 Application of Division 45 to disposals between February 1999 and September 1999
45‑40 Application of Division to plant formerly owned by exempt entities
45‑1 Application of Division 45 of the Income Tax Assessment Act 1997
Division 45 of the Income Tax Assessment Act 1997 applies to assessments for the income year in which 22 February 1999 occurs and later income years.
45‑3 Application of Division 45 to disposals between February 1999 and September 1999
(1) For disposals of plant or interests in plant on or after 22 February 1999 and before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999, Division 45 of the Income Tax Assessment Act 1997 applies with the modifications specified in this section.
(2) That Division applies as if subsection 45‑5(2) were replaced by this provision:
(2) The amount included is the lesser of:
(a) the excess referred to in paragraph (1)(e); and
(b) the amounts you have deducted or can deduct for depreciation of the plant or, if you disposed of an interest in the plant, so much of those amounts as is attributable to that interest.
It is included for the income year in which the disposal occurred.
(3) That Division applies as if paragraph 45‑5(5)(a) were replaced by this provision:
(a) it is included in that assessable income under a provision of this Act outside this Division and Parts 3‑1 and 3‑3 (about capital gains and losses); or
(4) That Division applies as if subsection 45‑10(2) were replaced by this provision:
(2) The amount included is the lesser of:
(a) the excess referred to in paragraph (1)(f); and
(b) that part of the amounts the partnership has deducted or can deduct for depreciation of the plant that has been or would be reflected in your interest in the partnership net income or partnership loss (your partnership amount) or, if you disposed of part of your interest in the plant, so much of your partnership amount as is attributable to that part of that interest.
It is included for the income year in which the disposal occurred.
(5) That Division applies as if paragraph 45‑10(5)(a) were replaced by this provision:
(a) it is included in that assessable income under a provision of this Act outside this Division and Parts 3‑1 and 3‑3 (about capital gains and losses); or
(6) That Division applies as if this section were added at the end of that Division:
45‑40 Application of Division to plant formerly owned by exempt entities
(1) There are the consequences set out in this table for a transition entity that disposes of the plant, interest in plant or interest (or part) in a partnership to an entity specified in subsection (3).
Consequences for transition entities |
Item | In this situation: | There are these consequences: |
1 | The entity chooses, under section 58‑20, that depreciation deductions and balancing adjustments are to be calculated by reference to the notional written down value of plant | (a) section 45‑5 has effect as if paragraph 45‑5(2)(b) were omitted and replaced by paragraph 58‑85(8)(a); and (b) section 45‑10 has effect as if paragraph 45‑10(2)(b) operated on that part of the amount worked out under paragraph 58‑85(8)(a) that has been or would be reflected in the entity’s interest in the partnership net income or partnership loss if that amount were an amount deducted for depreciation of the plant. |
2 | The entity chooses, under section 58‑20, that depreciation deductions and balancing adjustments are to be calculated by reference to the undeducted pre‑existing audited book value of plant | (a) section 45‑5 has effect as if paragraph 45‑5(2)(b) were omitted and replaced by paragraph 58‑145(8)(a); and (b) section 45‑10 has effect as if paragraph 45‑10(2)(b) operated on that part of the amount worked out under paragraph 58‑145(8)(a) that has been or would be reflected in the entity’s interest in the partnership net income or partnership loss if that amount were an amount deducted for depreciation of the plant. |
(2) There are the consequences set out in this table for an entity that:
(a) acquired the plant from a tax exempt vendor in connection with the acquisition of a business; and
(b) disposes of the plant, interest in plant or interest (or part) in a partnership to an entity specified in subsection (3).
Consequences for transition entities |
Item | In this situation: | There are these consequences: |
1 | The entity chooses, under section 58‑155, that depreciation deductions and balancing adjustments are to be calculated by reference to the notional written down value of plant | (a) section 45‑5 has effect as if paragraph 45‑5(2)(b) were omitted and replaced by paragraph 58‑215(3)(a); and (b) section 45‑10 has effect as if paragraph 45‑10(2)(b) operated on that part of the amount worked out under paragraph 58‑215(3)(a) that has been or would be reflected in the entity’s interest in the partnership net income or partnership loss if that amount were an amount deducted for depreciation of the plant. |
2 | The entity chooses, under section 58‑155, that depreciation deductions and balancing adjustments are to be calculated by reference to the undeducted pre‑existing audited book value of plant | (a) section 45‑5 has effect as if paragraph 45‑5(2)(b) were omitted and replaced by paragraph 58‑270(3)(a); and (b) section 45‑10 has effect as if paragraph 45‑10(2)(b) operated on that part of the amount worked out under paragraph 58‑270(3)(a) that has been or would be reflected in the entity’s interest in the partnership net income or partnership loss if that amount were an amount deducted for depreciation of the plant. |
(3) The entities are:
(a) an exempt entity; or
(b) the trustee of a complying superannuation fund; or
(c) the trustee of a complying approved deposit fund; or
(d) the trustee of a pooled superannuation trust; or
(e) an entity that is not an Australian resident; or
(f) an entity that is a State/Territory body for the purposes of Division 1AB of Part III of the Income Tax Assessment Act 1936 and whose income is exempt under that Division.
Apportionment
(4) If the entity concerned disposed of an interest in the plant rather than the plant (for a paragraph 45‑5(2)(b) case), instead of the amount worked out under the table in subsection (1) or (2), the entity uses so much of that amount as is attributable to that interest.
(5) If the entity concerned disposed of part of its interest in the plant rather than all of it (for a paragraph 45‑10(2)(b) case), instead of the amount worked out under the table in subsection (1) or (2), the entity uses so much of that amount as is attributable to that part of that interest.
Part 2‑15—Non‑assessable income
Division 50—Exempt entities
Table of sections
50‑1 Application of Division 50 of the Income Tax Assessment Act 1997
50‑50 Charities established prior to 1 July 1997
50‑1 Application of Division 50 of the Income Tax Assessment Act 1997
Division 50 of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years.
50‑50 Charities established prior to 1 July 1997
Disregard the use of the following amounts in determining (for the purposes of Subdivision 50‑A of the Income Tax Assessment Act 1997 whether a fund established before 1 July 1997 operates and pursues its purposes in Australia:
(a) an amount received by the entity before 1 July 1997;
(b) an amount derived from an amount mentioned in paragraph (a) or this paragraph.
Division 51—Exempt amounts
Table of sections
51‑1 Application of Division 51 of the Income Tax Assessment Act 1997
51‑1 Application of Division 51 of the Income Tax Assessment Act 1997
Division 51 of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years.
Division 52—Certain pensions, benefits and allowances are exempt from income tax
Table of sections
52‑1 Application of Division 52 of the Income Tax Assessment Act 1997
52‑1 Application of Division 52 of the Income Tax Assessment Act 1997
Division 52 of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years.
Division 53—Various exempt payments
Table of sections
53‑1 Application of Division 53 of the Income Tax Assessment Act 1997
53‑1 Application of Division 53 of the Income Tax Assessment Act 1997
Division 53 of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years.
Division 54—Exemption for certain payments made under structured settlements and structured orders
Table of sections
54‑1 Application of Division 54 of the Income Tax Assessment Act 1997
54‑1 Application of Division 54 of the Income Tax Assessment Act 1997
(1) Division 54 of the Income Tax Assessment Act 1997 applies to assessments for the 2001‑2002 income year and later income years.
(2) However, the Division does not apply unless the date of the settlement or order is 26 September 2001 or a later date.
Division 55—Payments that are not exempt from income tax
Table of sections
55‑1 Application of Division 55 of the Income Tax Assessment Act 1997
55‑1 Application of Division 55 of the Income Tax Assessment Act 1997
Division 55 of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years.
Division 59—Particular amounts of non‑assessable non‑exempt income
Table of Subdivisions
59‑N Native title benefits
Subdivision 59‑N—Native title benefits
Table of sections
59‑50 Indigenous holding entities
59‑50 Indigenous holding entities
Without limiting subsection 59‑50(6) of the Income Tax Assessment Act 1997, an entity was an Indigenous holding entity at a time if:
(a) the time occurred:
(i) during an income year starting on or after 1 July 2008; and
(ii) before the commencement of Chapter 2 of the Australian Charities and Not‑for‑profits Commission Act 2012; and
(b) at that time, the entity was endorsed under Subdivision 50‑B of the Income Tax Assessment Act 1997 as exempt from income tax because the entity was covered by item 1.1, 1.5, 1.5A or 1.5B of the table in section 50‑5 of that Act, as in force at that time.
Part 2‑20—Tax offsets
Division 61—Generally applicable tax offsets
Table of Subdivisions
61‑L Tax offset for Medicare levy surcharge (lump sum payments in arrears)
Subdivision 61‑L—Tax offset for Medicare levy surcharge (lump sum payments in arrears)
Table of Sections
61‑575 Application of Subdivision 61‑L of the Income Tax Assessment Act 1997
61‑575 Application of Subdivision 61‑L of the Income Tax Assessment Act 1997
Subdivision 61‑L (Tax offset for Medicare levy surcharge (lump sum payments in arrears)) of the Income Tax Assessment Act 1997 applies to assessments for the 2005‑06 income year and later income years.
Part 2‑25—Trading stock
Division 70—Trading stock
Table of sections
70‑1 Application of Division 70 of the Income Tax Assessment Act 1997
70‑10 Accounting for your disposal of items that stop being trading stock because of the change of definition
70‑20 Application of section 70‑20 of the Income Tax Assessment Act 1997 to trading stock bought on or after 1 July 1997
70‑55 Cost of live stock acquired by natural increase
70‑70 Valuing interests in FIFs on hand at the start of 1991‑92
70‑90 Application of sections 70‑90 and 70‑95 of the Income Tax Assessment Act 1997 to disposals of trading stock outside the ordinary course of business
70‑100 Application of section 70‑100 of the Income Tax Assessment Act 1997 to disposals of trading stock outside ordinary course of business
70‑105 Application of section 70‑105 of the Income Tax Assessment Act 1997 to deaths on or after 1 July 1997
70‑115 Application of section 70‑115 of the Income Tax Assessment Act 1997 to insurance and indemnity payments in 1997‑98 and later income years
70‑1 Application of Division 70 of the Income Tax Assessment Act 1997
(1) Division 70 (Trading stock) of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years.
(2) However, the sections of that Division listed in the table apply in accordance with the corresponding sections of this Act.
Application provisions for specific sections |
Item
| This section of the Income Tax Assessment Act 1997 ... | Applies as described in this provision of this Act ... |
1 | 70‑20 | 70‑20 |
2 | 70‑55 | 70‑55(1) |
3 | 70‑70 | 70‑70 |
4 | 70‑90 | 70‑90 |
5 | 70‑95 | 70‑90 |
6 | 70‑100 | 70‑100 |
7 | 70‑105 | 70‑105 |
8 | 70‑115 | 70‑115 |
70‑10 Accounting for your disposal of items that stop being trading stock because of the change of definition
(1) This section explains how to account for your disposal of an item during or after the 1997‑98 income year if:
(a) just before that income year, the item was an item of your trading stock, as defined in subsection 6(1) of the Income Tax Assessment Act 1936 as in force at that time; and
(b) at no time since that time has the item been an item of your trading stock, as defined in section 70‑10 of the Income Tax Assessment Act 1997.
Example: This section applies to an item you produced, manufactured, acquired or purchased before 1997‑98 for manufacture, sale or exchange, but have not held for that purpose at any time since just before the start of that year.
If the disposal is outside the ordinary course of business
(2) If:
(a) the disposal occurred on or after 1 July 1997; and
(b) former subsection 36(1) of the Income Tax Assessment Act 1936 (dealing with disposals of trading stock outside the ordinary course of business) would have applied to the disposal if it had occurred before 1 July 1997;
sections 70‑90 and 70‑95 of the Income Tax Assessment Act 1997 (dealing with disposals of trading stock outside the ordinary course of business) apply to your disposal of the item as if it were an item of your trading stock (as defined in section 70‑10 of the Income Tax Assessment Act 1997).
Note: This ensures that your assessable income includes the market value of the item on the day of disposal. This counters your deduction under the Income Tax Assessment Act 1936 for your expenditure to acquire the item as trading stock.
Additional rule for early balancers
(3) If the disposal occurred before 1 July 1997, then, for the purposes of former subsection 36(1) of the Income Tax Assessment Act 1936 (dealing with disposals of trading stock outside the ordinary course of business), the item is taken to have been, at the time of the disposal, trading stock as defined in section 70‑10 of the Income Tax Assessment Act 1997.
Note: See the note to subsection (2).
Deduction for closing value at end of 1996‑97
(4) If:
(a) former subsection 36(1) of the Income Tax Assessment Act 1936 applies to the disposal, or would have if it had occurred before 1 July 1997; and
(b) the item’s value was taken into account at the end of the 1996‑97 income year under former Subdivision B (Trading stock) of Division 2 of Part III of the Income Tax Assessment Act 1936;
you can deduct for the income year of the disposal the item’s value as so taken into account.
Note: This deduction offsets the effect of the item’s value not having been taken into account under Subdivision 70‑C of the Income Tax Assessment Act 1997 at the start of the income year of the disposal.
70‑20 Application of section 70‑20 of the Income Tax Assessment Act 1997 to trading stock bought on or after 1 July 1997
Section 70‑20 (Non‑arm’s length transactions) of the Income Tax Assessment Act 1997 applies to purchases that take place on or after 1 July 1997.
70‑55 Cost of live stock acquired by natural increase
(1) Section 70‑55 of the Income Tax Assessment Act 1997 applies to animals acquired by natural increase in or after the 1997‑98 income year.
(2) For the purposes of Subdivision 70‑C of the Income Tax Assessment Act 1997, the cost of an animal acquired by natural increase before the 1997‑98 income year is the cost price of the animal under former section 34 of the Income Tax Assessment Act 1936.
(3) For the purposes of Subdivision 70‑C of the Income Tax Assessment Act 1997, the cost of an animal acquired by a partnership by natural increase before the 1997‑98 income year depends on whether its cost price has been used in working out the share of a partner in the partnership’s net income or partnership loss for an earlier income year:
(a) if it has, the cost is that cost price, or the lowest of those cost prices if more than one cost price was used to work out the respective shares of partners;
(b) if it has not, the cost is the minimum cost price prescribed for the purposes of former section 34 of the Income Tax Assessment Act 1936 for that class of animal for the time when the animal was acquired, or the animal’s actual cost price if no minimum was prescribed.
Note 1: Former section 93 of the Income Tax Assessment Act 1936 allowed each partner to choose the cost price of an animal for working out the partner’s share of the partnership’s net income or partnership loss for income years before the 1997‑98 income year.
Note 2: Former section 34 of the Income Tax Assessment Act 1936 provides for the valuation of live stock acquired by natural increase before the 1997‑98 income year.
70‑70 Valuing interests in FIFs on hand at the start of 1991‑92
(1) If:
(a) an interest in a FIF was an item of your trading stock on hand at the start of the 1991‑92 income year; and
(b) that interest was also an item of your trading stock on hand at the end of the 1997‑98 income year or a later income year;
the value of the item at the end of the 1997‑98 or later income year is the value of the item as taken into account under former Subdivision B (Trading stock) of Division 2 of Part III of the Income Tax Assessment Act 1936 at the start of the 1991‑92 income year.
(2) This section has effect despite section 70‑45 (the general rule about how to value your trading stock at the end of the income year) of the Income Tax Assessment Act 1997, but subject to subsection 70‑70(2) (which allows you to elect to value all your interests in FIFs at their market value instead) of that Act.
Effect of election under former subsection 31(5) of the Income Tax Assessment Act 1936 on valuation of interests in FIFs
(3) If you made an election under former subsection 31(5) of the Income Tax Assessment Act 1936 (to value all your interests in FIFs at market value), subsection 70‑70(2) of the Income Tax Assessment Act 1997 applies to your interests in FIFs as if you had made an election under subsection 70‑70(2).
70‑90 Application of sections 70‑90 and 70‑95 of the Income Tax Assessment Act 1997 to disposals of trading stock outside the ordinary course of business
Sections 70‑90 (Assessable income on disposal of trading stock outside the ordinary course of business) and 70‑95 (Purchase price is taken to be market value) of the Income Tax Assessment Act 1997 apply to a disposal of an item of trading stock that takes place on or after 1 July 1997.
70‑100 Application of section 70‑100 of the Income Tax Assessment Act 1997 to disposals of trading stock outside ordinary course of business
Basic application
(1) Section 70‑100 (Notional disposal when you stop holding an item as trading stock) of the Income Tax Assessment Act 1997 applies to trading stock that stops being trading stock on hand of an entity on or after 1 July 1997.
Transitional provision if that section affects an assessment for 1996‑97
(2) The value of trading stock to which subsection (4) of that section applies is to be worked out using the rules in the Income Tax Assessment Act 1936 (and not the rules in Subdivision 70‑C of the Income Tax Assessment Act 1997) if:
(a) that section affects an assessment for the 1996‑97 year of income under the Income Tax Assessment Act 1936; and
(b) an election is made under subsection (4) of that section to value trading stock at what would have been its value at the end of an income year ending on the day it became trading stock on hand of the second entity.
Note: Section 70‑100 of the Income Tax Assessment Act 1997 may affect an assessment for the 1996‑97 income year if any of the entities with an interest in the trading stock (either before or after it becomes trading stock on hand of the second entity) has a 1996‑97 income year ending on or after 1 July 1997.
70‑105 Application of section 70‑105 of the Income Tax Assessment Act 1997 to deaths on or after 1 July 1997
(1) Section 70‑105 (Death of owner) of the Income Tax Assessment Act 1997 applies to trading stock that devolves as a result of a person dying on or after 1 July 1997.
Transitional provision if that section affects an assessment for 1996‑97
(2) The value of an item to which subsection (3) or (4) of that section applies is to be worked out using the rules in the Income Tax Assessment Act 1936 (and not the rules in Subdivision 70‑C of the Income Tax Assessment Act 1997) if:
(a) that section affects an assessment for the 1996‑97 year of income under the Income Tax Assessment Act 1936; and
(b) an election is made under subsection (3) or (4) of that section to value the item at an amount other than its market value.
Note: Section 70‑105 of the Income Tax Assessment Act 1997 may affect an assessment for the 1996‑97 income year if an entity on which the item devolves has a 1996‑97 income year ending on or after 1 July 1997.
70‑115 Application of section 70‑115 of the Income Tax Assessment Act 1997 to insurance and indemnity payments in 1997‑98 and later income years
Section 70‑115 (Compensation for lost trading stock) of the Income Tax Assessment Act 1997 applies to an amount received in the 1997‑98 income year or a later income year by way of insurance or indemnity for a loss of trading stock, even if the loss occurred earlier. However, that section does not apply to an amount that is assessable income for an income year before the 1997‑98 income year.
Part 2‑40—Rules affecting employees and other taxpayers receiving PAYG withholding payments
Division 82—Pre‑10 May 2006 entitlements to life benefit termination payments
Table of Subdivisions
82‑A Application of Division
82‑B Transitional termination payments: general
82‑C Pre‑payment statements
82‑D Directed termination payments made to superannuation and other entities
82‑E Pre‑10 May 2006 entitlements and employment termination payments made after 1 July 2012
Subdivision 82‑A—Application of Division
Table of sections
82‑10 Pre‑10 May 2006 entitlements—transitional termination payments
82‑10 Pre‑10 May 2006 entitlements—transitional termination payments
(1) This Division applies in relation to a life benefit termination payment received by you on or after 1 July 2007 if:
(a) the payment is received by you because you are entitled to it under a written contract, a law of the Commonwealth, a State, a Territory or another country, an instrument under such a law, a collective agreement within the meaning of the Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 or an AWA within the meaning of that Act; and
(b) the entitlement is provided for under that contract, law, instrument or agreement as in force just before 10 May 2006.
(2) However, this Division does not apply in relation to a life benefit termination payment received by you on or after 1 July 2012 (except to the extent provided by Subdivision 82‑E).
(3) This Division applies in relation to a life benefit termination payment only to the extent that the contract, law or agreement as in force just before 10 May 2006 specifies the amount of the payment, or a way to work out a specific amount of the payment.
(4) For the purpose of subsection (3), a specific amount can be worked out in ways including either or both of the following:
(a) by a method or formula for working out the amount;
(b) by provision for you or another person (or entity) to make a choice between forms of payment allowing amounts to be worked out as provided by subsection (3) and paragraph (a) of this subsection.
Example: For paragraph (b), a specific amount of a life benefit termination payment that you receive on 1 July 2007 can be worked out from the terms of your written contract if the contract provided (just before 10 May 2006) for you to choose between payment in the form of a cash amount of $100,000 or the transfer to you of 10,000 shares in a specified company.
Note: Section 80‑15 of the Income Tax Assessment Act 1997 allows for employment termination payments to include the transfer of property (for example, shares). If so, the market value of the property is included in the amount of the payment (except any part of the property for which separate consideration has been given).
(5) To the extent that this Division applies to a life benefit termination payment, Subdivision 82‑A of the Income Tax Assessment Act 1997 does not apply to the payment (subject to Subdivision 82‑E of this Act).
(6) In this Division:
transitional termination payment means:
(a) a life benefit termination payment to which this Division applies; or
(b) if this Division applies to only part of a life benefit termination payment—that part of the payment.
Subdivision 82‑B—Transitional termination payments: general
Table of sections
82‑10A Recipient has reached preservation age
82‑10B Lower cap amount
82‑10C Recipient under preservation age
82‑10D Upper cap amount
82‑10A Recipient has reached preservation age
Application
(1) This section applies to a transitional termination payment you receive (except any part of the payment that is a directed termination payment) if you are your preservation age or older on the last day of the income year in which you receive the payment.
Note 1: You do not pay income tax on directed termination payments: see section 82‑10G.
Note 2: Under section 82‑10C, you may also be entitled to a tax offset on the taxable component of a transitional termination payment you receive in an income year before the year in which you reached your preservation age.
Tax free component
(2) The tax free component of the payment is not assessable income and is not exempt income.
Taxable component
(3) The taxable component of the payment is assessable income.
(4) You are entitled to a tax offset that ensures that the rate of income tax on the amount mentioned in subsection (6) (the low rate part) does not exceed 15%.
(5) You are entitled to a tax offset that ensures that the rate of income tax on the amount mentioned in subsection (7) (the middle rate part) does not exceed 30%.
Note: The remaining part is taxed at the top marginal rate in accordance with the Income Tax Rates Act 1986.
(6) The low rate part is so much of the taxable component of the payment as does not exceed your lower cap amount under section 82‑10B.
(7) The middle rate part is so much of the taxable component of the payment as:
(a) exceeds your low rate part (if any); and
(b) does not exceed the amount worked out as follows:
Note: If you have received another life benefit termination payment in the same income year (or in an earlier income year) that is not a transitional termination payment, your entitlement to a tax offset under this section is not affected by your entitlement (if any) to a tax concession for the other payment (under section 82‑10 of the Income Tax Assessment Act 1997).
82‑10B Lower cap amount
Initial lower cap amount is the ETP cap for the income year
(1) Your lower cap amount in relation to a transitional termination payment you receive at a time in an income year is the ETP cap amount for the year, reduced in accordance with this section.
Note: For the ETP cap amount, see section 82‑160 of the Income Tax Assessment Act 1997.
Reduction of lower cap amount in relation to each payment
(2) Reduce your lower cap amount in relation to the payment (but not below zero):
(a) by the amount (if any) (the cap excess) worked out under subsection (3); and
(b) by so much of the total amounts of transitional termination payments (if any) that you received at an earlier time (whether in the income year or in an earlier income year) for which you are entitled to a tax offset under subsection 82‑10A(4).
(3) For paragraph (2)(a), the cap excess is worked out using this method:
Method statement
Step 1. Work out the total of the taxable components of all the amounts (if any) of transitional termination payments received by you (including any directed termination payments received on your behalf) in any income year before the income year in which you reached your preservation age.
Step 2. Work out the total of the taxable components of all the directed termination payments (if any) received on your behalf at an earlier time, in the income year in which you reached your preservation age or later.
Step 3. Work out the amount (the cap difference) by which $1,000,000 exceeds the ETP cap for the income year in which you receive the payment to which subsection (1) applies.
Step 4. The cap excess is the amount (not less than zero) by which the sum of the amounts in steps 1 and 2 exceeds the cap difference in step 3.
Directed termination payments—time of receipt when received by entity to which they are directed
(4) For the purposes of this section, a directed termination payment is taken to be received on your behalf at the time the entity to which it is directed receives the payment.
ETP cap not to be reduced under section 82‑10 of the Income Tax Assessment Act 1997
(5) For the purposes of this section, disregard any reduction of the ETP cap amount under section 82‑10 of the Income Tax Assessment Act 1997.
82‑10C Recipient under preservation age
Application
(1) This section applies to a transitional termination payment you receive (except any part of the payment that is a directed termination payment) if you are under your preservation age on the last day of the income year in which you receive the payment.
Note: You do not pay income tax on directed termination payments: see section 82‑10G.
Tax free component
(2) The tax free component of the payment is not assessable income and is not exempt income.
Taxable component
(3) The taxable component of the payment is assessable income.
(4) You are entitled to a tax offset that ensures that the rate of income tax on the amount mentioned in subsection (5) does not exceed 30%.
Note: The remainder of the taxable component is taxed at the top marginal rate in accordance with the Income Tax Rates Act 1986.
(5) The amount is so much of the taxable component of the payment as does not exceed your upper cap amount under section 82‑10D.
Note: If you have received another life benefit termination payment in the same income year (or in an earlier income year) that is not a transitional termination payment, your entitlement to a tax offset under this section is not affected by your entitlement (if any) to a tax concession for the other payment (under section 82‑10 of the Income Tax Assessment Act 1997).
82‑10D Upper cap amount
Initial upper cap amount is $1,000,000
(1) Your upper cap amount in relation to a transitional termination payment you receive at a time in an income year is $1,000,000, reduced in accordance with this section.
Reduction of upper cap amount for each payment
(2) Reduce your upper cap amount in relation to the payment (but not below zero):
(a) by the total of all the amounts (if any) included in your assessable income under subsection 82‑10C(3) and subsection 82‑10A(3) that you received at an earlier time (whether in the income year or in an earlier income year); and
(b) by the total amount of the taxable components of all directed termination payments (if any) received on your behalf at an earlier time (whether in the income year or in an earlier income year).
Directed termination payments—time of receipt when received by entity to which they are directed
(3) For this section, a directed termination payment is taken to be received on your behalf at the time the entity to which it is directed receives the payment.
Subdivision 82‑C—Pre‑payment statements
Table of sections
82‑10E Transitional termination payments—pre‑payment statements
82‑10E Transitional termination payments—pre‑payment statements
(1) This section applies if an entity (the payer) proposes to pay a transitional termination payment to an individual.
(2) The payer must give the individual a statement (a pre‑payment statement) meeting the requirements of this section.
(3) The statement must include the following information:
(a) the amount (if any) that would be the tax free component of the transitional termination payment;
(b) the amount (if any) that would be the taxable component of the transitional termination payment;
(c) any other information specified in the regulations.
(4) The statement must also include details of the opportunity to make a choice in accordance with section 82‑10F.
Subdivision 82‑D—Directed termination payments made to superannuation and other entities
Table of sections
82‑10F Directed termination payments
82‑10G Directed termination payments not assessable income and not exempt income
82‑10F Directed termination payments
(1) A transitional termination payment (or part of such a payment) is a directed termination payment if:
(a) the individual chooses, in accordance with this section, to direct the payment (or part of the payment) to be made; and
(b) the payment (or part of the payment) is made on the individual’s behalf as directed.
Choice to make payment
(2) An individual may choose, within 30 days after a pre‑payment statement about a transitional termination payment is given to the individual under section 82‑10E, to direct the payer to use all or part of the payment to make a payment on behalf of the individual:
(a) to a complying superannuation plan; or
(b) to purchase a superannuation annuity.
(3) To make the choice, the individual must:
(a) make it in the approved form; and
(b) give the completed form to the payer.
(4) The payer must, immediately after receiving a completed form under subsection (3):
(a) give the entity (or entities) to which payment is directed written notice of the amount that is to be paid, and of the tax free component of the amount; and
(b) comply with the direction (or directions) in the form.
82‑10G Directed termination payments not assessable income and not exempt income
A directed termination payment made on your behalf, that you are taken to receive under section 80‑20 of the Income Tax Assessment Act 1997, is not assessable income and is not exempt income.
Note 1: Directed termination payments are paid into a complying superannuation plan (or to purchase a superannuation annuity) on your behalf: see section 82‑10F.
Note 2: The taxable component of the payment is included in the assessable income of the entity receiving the payment: see section 295‑190 of the Income Tax Assessment Act 1997.
Note 3: In addition, income tax may be payable on a benefit you later receive from the plan to which the directed termination payment is made: see Divisions 301‑307 of the Income Tax Assessment Act 1997.
Subdivision 82‑E—Pre‑10 May 2006 entitlements and employment termination payments made after 1 July 2012
Table of sections
82‑10H Transitional termination payments may reduce ETP cap amount for payments under section 82‑10 after 1 July 2012
82‑10H Transitional termination payments may reduce ETP cap amount for payments under section 82‑10 after 1 July 2012
(1) This section deals with the application of paragraph 82‑10(4)(b) of the Income Tax Assessment Act 1997 to an income year beginning on or after 1 July 2012.
(2) For the purposes of that paragraph, the ETP cap amount is taken to be further reduced (but not below zero) by the amount mentioned in subsection (3) (the concessional amount) of any transitional termination payment made in consequence of the same employment termination as the employment termination to which the paragraph applies.
(3) The concessional amount of a transitional termination payment is the part (if any) of the taxable component of the payment for which you are entitled to a tax offset under section 82‑10A or 82‑10C of this Act.
Division 83A—Employee share schemes
Table of Subdivisions
83A‑A Application of Division 83A of the Income Tax Assessment Act 1997
83A‑B Application of former provisions of the Income Tax Assessment Act 1936
Subdivision 83A‑A—Application of Division 83A of the Income Tax Assessment Act 1997
Table of sections
83A‑5 Application of Division 83A of the Income Tax Assessment Act 1997
83A‑5 Application of Division 83A of the Income Tax Assessment Act 1997
(1) Division 83A of the Income Tax Assessment Act 1997 applies in relation to an ESS interest if:
(a) the interest was acquired on or after 1 July 2009; and
(b) the relevant share or right (within the meaning of Division 13A of Part III of the Income Tax Assessment Act 1936, as in force at the time (the pre‑Division 83A time) occurring just before Schedule 1 to the Tax Laws Amendment (2009 Budget Measures No. 2) Act 2009 commenced, (former Division 13A)) was not acquired (within the meaning of former Division 13A) before 1 July 2009.
(2) Furthermore, Subdivision 83A‑C of the Income Tax Assessment Act 1997 (and the rest of Division 83A of that Act, to the extent that it relates to that Subdivision) also applies in relation to an ESS interest if:
(a) all of the following subparagraphs apply:
(i) at the pre‑Division 83A time, subsection 139B(3) of the Income Tax Assessment Act 1936 applied in relation to the interest;
(ii) the interest was acquired (within the meaning of former Division 13A) before 1 July 2009;
(iii) the cessation time mentioned in subsection 139B(3) of the Income Tax Assessment Act 1936, as in force at the pre‑Division 83A time, for the interest did not occur before 1 July 2009; or
(b) all of the following subparagraphs apply:
(i) at the pre‑Division 83A time, section 26AAC of the Income Tax Assessment Act 1936, as in force at that time, (former section 26AAC) applied in relation to the interest;
(ii) the interest was acquired (within the meaning of former section 26AAC) before 1 July 2009;
(iii) an amount has not been included in a person’s assessable income under former section 26AAC in relation to the interest before 1 July 2009.
(2A) To avoid doubt, for the purposes of subparagraph (2)(a)(i), section 139CDA of the Income Tax Assessment Act 1936 applied to the interest at the pre‑Division 83A time if the taxpayer in question first became or becomes an employee, as mentioned in that section, before the cessation time for the interest. It does not matter whether the employee so became or becomes an employee before, on or after the pre‑Division 83A time.
Note: Section 139CDA was about shares or rights acquired while engaged in foreign service.
(3) Subsection (2) applies despite section 83A‑105 of the Income Tax Assessment Act 1997.
(4) If Subdivision 83A‑C of the Income Tax Assessment Act 1997 applies in relation to an ESS interest because of subsection (2):
(a) do not include an amount in your assessable income under subsection 83A‑110(1) of that Act in relation to the ESS interest to the extent that the amount relates to your employment outside Australia; and
(b) subject to subsection 83A‑115(3) or 83A‑120(3) of that Act, whichever is applicable, treat the ESS deferred taxing point for the interest as being:
(i) if paragraph (2)(a) of this section applies—the cessation time mentioned in subparagraph (2)(a)(iii); or
(ii) if paragraph (2)(b) applies—the earliest time at which an amount is included in a person’s assessable income under former section 26AAC in relation to the interest; and
(c) treat the reference in subsection 83A‑115(3) or 83A‑120(3) (30 day rule for ESS deferred taxing point), whichever is applicable, of that Act to the time worked out under subsection 83A‑115(2) or 83A‑120(2) of that Act as being a reference to the time worked out under paragraph (b) of this subsection; and
(d) treat the requirements in paragraphs 83A‑310(1)(a), (b) and (c) of that Act as being satisfied in relation to the interest if, and only if:
(i) if paragraph (2)(a) applies—the 2 requirements mentioned in section 139DD of the Income Tax Assessment Act 1936 (as in force at the pre‑Division 83A time) are satisfied in relation to the interest; or
(ii) if paragraph (2)(b) applies—the requirements in paragraphs (8D)(a), (b) and (c) of former section 26AAC are satisfied in relation to the interest; and
(e) Subdivision 14‑C in Schedule 1 to the Taxation Administration Act 1953 (about TFN withholding tax (ESS)) does not apply to the ESS interest; and
(f) if paragraph (2)(a) applies:
(i) for the purposes of Division 115 of the Income Tax Assessment Act 1997 (Discount capital gains and trusts’ net capital gains), treat the ESS interest as having been acquired by an individual when the individual acquired the legal title in the share or right of which the ESS interest forms part; and
(ii) for the purposes of Division 392 in Schedule 1 to the Taxation Administration Act 1953 (Statements), disregard any election made under former section 139E of the Income Tax Assessment Act 1936; and
(g) if paragraph (2)(b) applies—paragraph 82‑135(m) of the Income Tax Assessment Act 1997 does not apply in relation to the ESS interest.
Subdivision 83A‑B—Application of former provisions of the Income Tax Assessment Act 1936
Table of sections
83A‑10 Savings—continued operation of former provisions
83A‑15 Indeterminate rights
83A‑10 Savings—continued operation of former provisions
(1) This section applies if:
(a) at the time (the pre‑Division 83A time) occurring just before Schedule 1 to the Tax Laws Amendment (2009 Budget Measures No. 2) Act 2009 commenced:
(i) Division 13A of Part III of the Income Tax Assessment Act 1936, as in force at that time, (former Division 13A) applied in relation to a share or right (within the meaning of former Division 13A); or
(ii) section 26AAC of that Act, as in force at that time, applied in relation to a share or right (within the meaning of that section as in force at that time); and
(b) if there is a beneficial interest in the share or right that is an ESS interest—Division 83A of the Income Tax Assessment Act 1997 does not apply in relation to the interest under section 83A‑5.
(2) If subparagraph (1)(a)(i) applies, to avoid doubt, former Division 13A continues to apply (in spite of its repeal) to the share or right.
(3) If subparagraph (1)(a)(ii) applies, to avoid doubt, sections 26AAC and 26AAD of the Income Tax Assessment Act 1936, as in force at the pre‑Division 83A time, continue to apply (in spite of their repeal) to the share or right.
83A‑15 Indeterminate rights
(1) This section applies if:
(a) you acquired a beneficial interest in a right before 1 July 2009; and
(b) on or after 1 July 2009, the right becomes a right to acquire a beneficial interest in a share.
(2) Division 13A of the Income Tax Assessment Act 1936 is taken to have applied as if the right had always been a right to acquire the beneficial interest in the share.
Amendment of assessments
(3) Section 170 of the Income Tax Assessment Act 1936 does not prevent the amendment of an assessment at any time for the purpose of giving effect to subsection (2) of this section.
Chapter 3—Specialist liability rules
Part 3‑1—Capital gains and losses: general topics
Division 102—Application of Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997
Table of sections
102‑1 Application of Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997
102‑5 Working out capital gains and capital losses
102‑15 Applying net capital losses
102‑20 Net capital gains, capital gains and capital losses for income years before 1998‑99
102‑25 Transitional capital gains tax provisions for certain Cocos (Keeling) Islands and Norfolk Island assets
102‑1 Application of Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997
Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997 (about capital gains and capital losses) apply to assessments for the 1998‑99 income year and later income years.
102‑5 Working out capital gains and capital losses
General rule
(1) In working out whether you have made a capital gain or a capital loss from a CGT event that happens in relation to a CGT asset in the 1998‑99 income year or a later income year, you use only the provisions of Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997 (or a provision of an Act that modifies the operation of those Parts) unless a provision of this Part or Part 3‑3 of this Act also requires you to use another provision.
Note 1: This means that, for example, in working out your cost base of the asset, you will apply the new law to circumstances that occurred before the 1998‑99 income year (except where this Act requires you to use another provision).
Note 2: In most cases, the other provision is a provision of this Act. However, in some cases, other provisions may be relevant (for example, provisions of the Income Tax Assessment Act 1936).
Note 3: Part X of the Income Tax Assessment Act 1936 includes provisions that modify the operation of Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997.
Roll‑overs
(2) If:
(a) an entity acquired a CGT asset before the start of the 1998‑99 income year as part of a transaction or event or series of transactions or events in respect of which there was a roll‑over under the Income Tax Assessment Act 1936; and
(b) the entity owned the asset just before the start of that income year; and
(c) a CGT event happens in relation to the asset in that income year or a later one;
the provisions of Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997 apply to the asset from the time when the roll‑over happened except that the first element of the cost base and reduced cost base of the asset (when the roll‑over happened) is the amount the entity is taken to have paid as consideration in respect of the acquisition of the asset under the relevant provision of the Income Tax Assessment Act 1936.
102‑15 Applying net capital losses
(1) In working out whether you have a net capital gain for the 1998‑99 income year, the amount of any net capital loss for the 1997‑98 income year or an earlier income year must be worked out under the Income Tax Assessment Act 1936.
(2) If you had a net capital loss for the 1997‑98 income year, or some unapplied net capital loss for either of the 2 preceding income years, under former Part IIIA of the Income Tax Assessment Act 1936, it can be carried forward to a later income year to be applied under the Income Tax Assessment Act 1997.
Note: The way in which capital losses can be applied may be affected by other provisions: see section 102‑30 of the Income Tax Assessment Act 1997.
(3) If you had a net listed personal‑use asset loss for the 1997‑98 income year under former Part IIIA of the Income Tax Assessment Act 1936, it is taken for the purposes of the Income Tax Assessment Act 1997 to be a net capital loss from collectables for that income year.
102‑20 Net capital gains, capital gains and capital losses for income years before 1998‑99
For the 1997‑98 income year or an earlier income year:
capital gain has the meaning given by former Part IIIA of the Income Tax Assessment Act 1936.
capital loss has the meaning given by former Part IIIA of the Income Tax Assessment Act 1936.
net capital gain has the meaning given by former Part IIIA of the Income Tax Assessment Act 1936.
102‑25 Transitional capital gains tax provisions for certain Cocos (Keeling) Islands and Norfolk Island assets
(1) If:
(a) an entity was a prescribed person (within the meaning of former Division 1A of Part III of the Income Tax Assessment Act 1936) because of residence in the Territory of Cocos (Keeling) Islands on or before 30 June 1991; and
(b) the entity acquired a CGT asset on or before that day; and
(c) the asset is not a pre‑CGT asset; and
(d) had a CGT event happened in relation to the asset immediately before 1 July 1991, and had the Income Tax Assessment Act 1997 been in force at the time of the event, any capital gain or capital loss from the event would have been disregarded because the entity was a prescribed person;
then, for the purposes of Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997:
(e) the asset is taken to have been acquired by the entity on 30 June 1991; and
(f) the first element of the asset’s cost base in the hands of the entity (at the end of that day) is its market value at that time.
Note: A prescribed person was a Territory resident, a Territory company or a trustee of a Territory trust, as defined by former sections 24C, 24D and 24E of the Income Tax Assessment Act 1936.
(2) If:
(a) an entity was a prescribed person (within the meaning of former Division 1A of Part III of the Income Tax Assessment Act 1936) because of residence in Norfolk Island on or before 23 October 2015; and
(b) the entity acquired a CGT asset on or before that day; and
(c) the asset is not a pre‑CGT asset; and
(d) had a CGT event happened in relation to the asset immediately before 24 October 2015, any capital gain or capital loss from the event would have been disregarded because the entity was a prescribed person;
then Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997 apply in relation to the asset as if references in those Parts to 20 September 1985 were references to 24 October 2015.
(3) Despite Division 121 of the Income Tax Assessment Act 1997, the entity is not required to keep records of:
(a) the date of acquisition of an asset in relation to which subsection (1) of this section applies, or its cost base on 30 June 1991; or
(b) the date of acquisition of an asset in relation to which subsection (2) of this section applies.
(4) However, the entity may choose that subsection (1) does not apply in relation to an asset to which it would (apart from this subsection) apply if:
(a) a CGT event happens in relation to the asset; and
(b) as at the date on which it happens, the entity has complied with Division 121 of the Income Tax Assessment Act 1997 in relation to the asset.
Division 104—CGT events
Table of Subdivisions
104‑C End of a CGT asset
104‑D Bring into existence a CGT asset
104‑E Trusts
104‑G Shares
104‑I Australian residency ends
104‑J CGT events relating to roll‑overs
104‑K Other CGT events
Subdivision 104‑C—End of a CGT asset
Table of sections
104‑25 Cancellation, surrender and similar endings
104‑25 Cancellation, surrender and similar endings
The capital proceeds from an ending referred to in subsection 104‑25(3) of the Income Tax Assessment Act 1997 in relation to shares are reduced by any amount that was taken into account as a capital gain for the shares under former section 160ZL of the Income Tax Assessment Act 1936 for the 1997‑98 income year or an earlier income year.
Subdivision 104‑D—Bringing into existence a CGT asset
Table of sections
104‑40 Granting an option
104‑40 Granting an option
A capital gain or capital loss is disregarded if:
(a) you made the capital gain or capital loss for the 1997‑98 income year or an earlier income year under former Part IIIA of the Income Tax Assessment Act 1936 because you granted an option to an entity, or renewed or extended an option you had granted; and
(b) the other entity exercises the option in the 1998‑99 income year or a later income year.
Subdivision 104‑E—Trusts
Table of sections
104‑70 Capital payment before 18 December 1986 for trust interest
104‑70 Capital payment before 18 December 1986 for trust interest
(1) Section 104‑70 of the Income Tax Assessment Act 1997 applies for the purpose of working out the cost base of a unit or an interest you own in a trust if these conditions are satisfied:
(a) CGT event E4 happens in relation to the unit; and
(b) you were taken to have disposed of the unit or interest under former section 160ZM of the Income Tax Assessment Act 1936 (the former equivalent of CGT event E4) because of a payment made by the trustee before 18 December 1986; and
(c) some or all of the payment (the non‑assessable part) was not included in your assessable income; and
(d) some or all of the non‑assessable part (the attributable part) was attributable to a deduction under former Division 10C or 10D of Part III of the Income Tax Assessment Act 1936 (about capital works).
(2) The cost base of the unit or interest is also reduced by the attributable part.
(3) Subsection 104‑70(5) of the Income Tax Assessment Act 1997 also reduces the cost base and reduced cost base of a unit or interest to nil if an amount was taken into account as a capital gain for the unit or interest under former section 160ZM of the Income Tax Assessment Act 1936.
Subdivision 104‑G—Shares
Table of sections
104‑135 Capital payment for shares
104‑135 Capital payment for shares
Subsection 104‑135(3) of the Income Tax Assessment Act 1997 also reduces the cost base and reduced cost base of a share to nil if an amount was taken into account as a capital gain for the share under former section 160ZL of the Income Tax Assessment Act 1936.
Subdivision 104‑I—Australian residency ends
Table of sections
104‑165 Choices made under subsection 104‑165(2) of the Income Tax Assessment Act 1997
104‑166 Subsection 104‑165(1) still applies if you continue to be a short term Australian resident
104‑165 Choices made under subsection 104‑165(2) of the Income Tax Assessment Act 1997
(1) This section applies if:
(a) a choice was made under subsection 104‑165(2) of the Income Tax Assessment Act 1997; and
(b) because of the choice, an asset is taken to have the necessary connection with Australia under subsection 104‑165(3) of the Income Tax Assessment Act 1997 just before the commencement of Schedule 4 of the Tax Laws Amendment (2006 Measures No. 4) Act 2006.
(2) To avoid doubt, the choice has effect for the purposes of subsection 104‑165(3) of the Income Tax Assessment Act 1997 as in force on and after that commencement.
Note: This means that the asset will be taxable Australian property under the Income Tax Assessment Act 1997 as in force on and after that commencement.
104‑166 Subsection 104‑165(1) still applies if you continue to be a short term Australian resident
Subsection 104‑165(1) of the Income Tax Assessment Act 1997 continues to apply, despite its repeal by item 20 of Schedule 1 to the Tax Laws Amendment (2006 Measures No. 1) Act 2006, to an individual:
(a) who is in Australia on the day on which that item receives the Royal Assent; and
(b) who remains an Australian resident from that day until the time subsection 104‑165(1) is applied in respect of him or her.
Subdivision 104‑J—CGT events relating to roll‑overs
Table of sections
104‑175 Company ceasing to be member of wholly‑owned group after roll‑over
104‑185 Change of status of replacement asset for a roll‑over under Division 17A of former Part IIIA of the 1936 Act or Division 123 of the 1997 Act
104‑175 Company ceasing to be member of wholly‑owned group after roll‑over
(1) Unless subsection (2) or (3) of this section applies, sections 104‑175 and 104‑180 of the Income Tax Assessment Act 1997 apply if there was a roll‑over under former section 160ZZO of the Income Tax Assessment Act 1936 for a disposal of an asset from one company to another company (the transferee).
(2) If CGT event J1 would happen in relation to the roll‑over in a situation involving something happening in relation to the transferee, that event does not happen if there would have been no deemed disposal and re‑acquisition of the asset by the transferee in that situation under whichever of these provisions would have been relevant for that situation if it had happened before the start of the 1998‑99 income year:
(a) former section 160ZZOA of that Act; or
(b) former paragraphs 160ZZO(1)(g) and (h) of that Act.
(3) In working out whether subsection (2) affects you, take into account provisions of other Acts that amended former Part IIIA of the Income Tax Assessment Act 1936 and that affect the situation referred to in that subsection.
104‑185 Change of status of replacement asset for a roll‑over under Division 17A of former Part IIIA of the 1936 Act or Division 123 of the 1997 Act
Section 104‑185 of the Income Tax Assessment Act 1997 applies to a replacement asset for a roll‑over under:
(a) Division 17A of former Part IIIA of the Income Tax Assessment Act 1936; or
(b) Division 123 of the Income Tax Assessment Act 1997;
in the same way as it applies to a replacement asset for a roll‑over under Subdivision 152‑E of the Income Tax Assessment Act 1997.
Subdivision 104‑K—Other CGT events
Table of sections
104‑205 Partial realisation of intellectual property
104‑235 CGT event K7: asset used for old law R&D activities
104‑205 Partial realisation of intellectual property
Subsection 104‑205(3) of the Income Tax Assessment Act 1997 also reduces the cost base and reduced cost base of the item to nil if an amount was taken into account as a capital gain for the item under former section 160ZZD of the Income Tax Assessment Act 1936.
104‑235 CGT event K7: asset used for old law R&D activities
Section applies if asset used for old law R&D activities
(1) This section applies to an R&D entity if:
(a) a balancing adjustment event happens in an income year commencing on or after 1 July 2011 for an asset held by the R&D entity; and
(b) at some time when the R&D entity held the asset, it used the asset for the purpose of the carrying on by or on its behalf of research and development activities (within the meaning of former section 73B of the Income Tax Assessment Act 1936).
Changed application of sections 104‑235 and 104‑240
(2) Sections 104‑235 and 104‑240 of the Income Tax Assessment Act 1997 (the new Act) apply to the R&D entity for the event as if:
(a) a reference in those sections to the purpose of conducting R&D activities for which you were registered under section 27A of the Industry Research and Development Act 1986;
included:
(b) a reference to the purpose described in paragraph (1)(b) of this section.
Normal rules do not apply for the asset and the event
(3) Neither of the following sections:
(a) sections 104‑235 and 104‑240 of the new Act (as amended by the Tax Laws Amendment (Research and Development) Act 2011);
(b) sections 104‑235 and 104‑240 of the new Act (as those sections apply because of Part 2 of Schedule 4 to the Tax Laws Amendment (Research and Development) Act 2011);
to the extent that they would otherwise apply apart from this section to the R&D entity for the event, do so apply to the R&D entity for the event.
Note 1: The sections described in paragraph (a) would otherwise apply for the event in a case where the R&D entity had used the asset for the purpose of conducting R&D activities for which it was registered under section 27A of the Industry Research and Development Act 1986.
Note 2: The sections described in paragraph (b) would otherwise apply in respect of the purpose described in paragraph (1)(b) of this section.
Division 108—CGT assets
Table of Subdivisions
108‑A What a CGT asset is
108‑B Collectables
108‑D Separate CGT assets
Subdivision 108‑A—What a CGT asset is
Table of sections
108‑5 CGT assets
108‑5 CGT assets
If:
(a) an entity owned a thing that is not a form of property before 26 June 1992 and at all times from that day to the start of the entity’s 1998‑99 income year; and
(b) that thing was not, before 26 June 1992, an asset as defined in former section 160A of the Income Tax Assessment Act 1936;
the thing is not a CGT asset.
Subdivision 108‑B—Collectables
Table of sections
108‑15 Sets of collectables
108‑15 Sets of collectables
Section 108‑15 of the Income Tax Assessment Act 1997 does not apply to a collectable you own that you last acquired before 16 December 1995.
Note: That section has special rules for the separate disposal of collectables that are a set.
Subdivision 108‑D—Separate CGT assets
Table of sections
108‑75 Capital improvements to CGT assets for which a roll‑over may be available
108‑85 Improvement threshold
108‑75 Capital improvements to CGT assets for which a roll‑over may be available
(1) Subsection 108‑75(2) of the Income Tax Assessment Act 1997 applies to a roll‑over under former section 160ZWA of the Income Tax Assessment Act 1936 in the same way that it applies to a roll‑over under Subdivision 124‑J of the Income Tax Assessment Act 1997.
(2) Subsection 108‑75(2) of the Income Tax Assessment Act 1997 applies to a roll‑over under former section 160ZZF of the Income Tax Assessment Act 1936 in the same way that it applies to a roll‑over under Subdivision 124‑L of the Income Tax Assessment Act 1997.
(3) Subsection 108‑75(2) of the Income Tax Assessment Act 1997 applies to a roll‑over under former section 160ZZPE of the Income Tax Assessment Act 1936 in the same way that it applies to a roll‑over under Subdivision 124‑C of the Income Tax Assessment Act 1997.
(4) Subsection 108‑75(2) of the Income Tax Assessment Act 1997 applies to a roll‑over under former section 160ZWC of the Income Tax Assessment Act 1936 in the same way that it applies to a roll‑over under Subdivision 124‑K of the Income Tax Assessment Act 1997.
Note: This provision covers the case where the roll‑over occurred in the 1997‑98 income year or an earlier one and the relevant CGT event in the 1998‑99 income year or a later one.
108‑85 Improvement threshold
Despite section 108‑85 of the Income Tax Assessment Act 1997, the Commissioner is entitled to publish the improvement threshold for the 1998‑99 income year:
(a) before the beginning of that year; or
(b) within a reasonable time after the beginning of that year.
Division 109—Acquisition of CGT assets
Table of Subdivisions
109‑A Operative rules
Subdivision 109‑A—Operative rules
Table of sections
109‑5 General acquisition rules
109‑5 General acquisition rules
(1) If:
(a) the circumstances specified in the second column of the table in subsection 109‑5(2) of the Income Tax Assessment Act 1997 for CGT event E1, E2 or E3 happened in relation to an asset before 12 noon, by legal time in the Australian Capital Territory, on 12 January 1994; and
(b) the trustee that owned the asset just after those circumstances happened also owned it at all times from then until the start of the trustee’s 1998‑99 income year;
the question whether those circumstances resulted in an acquisition of an asset by the trustee is to be determined under the Income Tax Assessment Act 1936 as in force just before 12 noon, by legal time in the Australian Capital Territory, on 12 January 1994.
(2) The acquisition rule for CGT event E9 (about an entity creating a trust over future property) in the table in subsection 109‑5(2) of the Income Tax Assessment Act 1997 does not apply to you as trustee if the agreement to create the trust was made before 12 noon, by legal time in the Australian Capital Territory, on 12 January 1994.
Division 110—Cost base and reduced cost base
Table of Subdivisions
110‑A Cost base
Subdivision 110‑A—Cost base
Table of sections
110‑25 Cost base of CGT asset of life insurance company or registered organisation
110‑35 Incidental costs
110‑25 Cost base of CGT asset of life insurance company or registered organisation
For the purpose of working out the capital gain of a life insurance company or a registered organisation from a CGT event happening after 11.45 am (by legal time in the Australian Capital Territory) on 21 September 1999 and before 1 July 2000, the cost base includes indexation only if the company or organisation chooses that the cost base includes indexation.
110‑35 Incidental costs
Despite subsection 110‑35(2) of the Income Tax Assessment Act 1997, expenditure for professional advice about taxation incurred before 1 July 1989 does not form part of the cost base of a CGT asset.
Division 112—Modifications to cost base and reduced cost base
Table of Subdivisions
112‑A General rules
112‑B Special rules
Subdivision 112‑A—General rules
Table of sections
112‑20 Market value substitution rule
112‑20 Market value substitution rule
In working out the cost base and reduced cost base of a CGT asset:
(a) that you acquired before 16 August 1989; and
(b) to which paragraph 112‑20(2)(b) or (c), or item 5 or 6 in the table in subsection 112‑20(3), of the Income Tax Assessment Act 1997 would apply (apart from this section);
disregard subsections 112‑20(2) and (3) of that Act.
Note: This section preserves the pre‑16 August 1989 position for, among other things, shares or units issued or allotted to you by allowing the market value substitution rule to apply.
Subdivision 112‑B—Special rules
Table of sections
112‑100 Effect of terminated gold mining exemptions
112‑100 Effect of terminated gold mining exemptions
(1) This section affects how to work out a capital gain or capital loss you make from a CGT event that happens to a CGT asset after 31 December 1990 if:
(a) before 1 January 1991, you used the asset (other than on a prior holding of it) solely for the purpose of producing exempt income, and principally for the purpose of producing exempt income to which former paragraph 23(o) or former subsection 23C(1) of the Income Tax Assessment Act 1936 (about income from producing or selling gold) applied; and
(b) you owned the asset continuously from the end of 31 December 1990 until the CGT event.
Capital gain
(2) For the purposes of working out a capital gain you make from the CGT event, if the asset’s market value at the end of 31 December 1990 was more than its cost base at that time, the first element of its cost base at that time is that market value.
Capital loss
(3) The rest of this section has effect for the purposes of working out a capital loss you make from the CGT event.
(4) If the asset’s market value at the end of 31 December 1990 was less than its reduced cost base at that time, the first element of its reduced cost base at that time is that market value.
(5) In applying section 110‑55 of the Income Tax Assessment Act 1997 (about reduced cost base):
(a) treat your notional deductions (within the meaning of Subdivision B or C of former Division 16H of Part III of the Income Tax Assessment Act 1936) as amounts you have deducted; and
(b) disregard the effect of former sections 159GZZO and 159GZZZ of that Act.
Division 114—Indexation of cost base
Table of sections
114‑5 When indexation relevant
114‑5 When indexation relevant
Indexation is not relevant to the capital gain of a life insurance company or a registered organisation from a CGT event happening after 11.45 am (by legal time in the Australian Capital Territory) on 21 September 1999 and before 1 July 2000 unless the company or organisation has chosen that the cost base include indexation for the purposes of the Income Tax Assessment Act 1997.
Division 118—Exemptions
Table of Subdivisions
118‑A General exemptions
118‑B Main residence
118‑C Goodwill
Subdivision 118‑A—General exemptions
Table of sections
118‑10 Interests in collectables
118‑24A Pilot plant
118‑10 Interests in collectables
(1) This section applies to a collectable you own that:
(a) is an interest in:
(i) artwork, jewellery, an antique or a coin or medallion; or
(ii) a rare folio, manuscript or book; or
(iii) a postage stamp or first day cover; and
(b) you last acquired before 16 December 1995.
(2) A capital gain or capital loss you make from the interest is disregarded if the first element of its cost base is $500 or less.
118‑24A Pilot plant
(1) Disregard a capital gain or capital loss you make from a CGT event happening in relation to pilot plant, as defined in former subsection 73B(1) of the Income Tax Assessment Act 1936:
(a) if the CGT event happens after 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; or
(b) if:
(i) the CGT event is CGT event A1 (disposal of a CGT asset); and
(ii) the time of the event is when you entered into the contract for the disposal of the CGT asset; and
(iii) the change of ownership constituting the disposal occurred after 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999.
(2) However, subsection (1) does not apply to assessments for the 2001‑2002 income year and later income years.
Subdivision 118‑B—Main residence
Table of sections
118‑110 Foreign residents
118‑195 Exemption—dwelling acquired from deceased estate
118‑110 Foreign residents
(1) None of the amendments made by Part 1 of Schedule 1 to the Treasury Laws Amendment (Reducing Pressure on Housing Affordability Measures) Act 2019 apply in relation to a capital gain or capital loss you make from a CGT event if:
(a) the CGT event happens on or before 30 June 2020; and
(b) you held an ownership interest in the dwelling to which the CGT event relates throughout the period:
(i) starting just before 7.30 pm, by legal time in the Australian Capital Territory, on 9 May 2017; and
(ii) ending just before the CGT event happens.
(2) For the purposes of paragraph (1)(b), treat the ownership interest in the dwelling as having been held by you during a time during which the interest was held by:
(a) in relation to sections 118‑195 to 118‑210 of the Income Tax Assessment Act 1997—the deceased or the trustee of the deceased estate; or
(b) in relation to sections 118‑215 to 118‑230 of that Act—the trustee of the special disability trust.
118‑195 Exemption—dwelling acquired from deceased estate
(1) This section applies to an entity:
(a) that acquired an ownership interest in a dwelling as trustee of a deceased estate on or before 7.30 pm, by legal time in the Australian Capital Territory, on 20 August 1996; or
(b) to whom an ownership interest in a dwelling passed as a beneficiary in a deceased estate on or before that time.
(2) Item 1 in the table in subsection 118‑195(1) of the Income Tax Assessment Act 1997 applies to the entity in relation to the dwelling as if that item required the dwelling to be the deceased’s main residence throughout the deceased’s ownership period.
(3) Section 118‑192 and subsections 118‑190(4) and 118‑200(4) do not apply to the entity in relation to the dwelling.
Subdivision 118‑C—Goodwill
Table of sections
118‑260 Business exemption threshold
118‑260 Business exemption threshold
Despite section 118‑260 of the Income Tax Assessment Act 1997, the Commissioner is entitled to publish the business exemption threshold for the 1998‑99 income year:
(a) before the beginning of that year; or
(b) within a reasonable time after the beginning of that year.
Division 121—Record keeping
Table of sections
121‑15 Retaining records under Division 121
121‑25 Records for mergers between qualifying superannuation funds
121‑15 Retaining records under Division 121
If you were retaining records under former section 160ZZU of the Income Tax Assessment Act 1936 for an asset, you must continue to retain them in accordance with Division 121 of the Income Tax Assessment Act 1997.
121‑25 Records for mergers between qualifying superannuation funds
(1) A superannuation fund to which former subsection 160ZZU(6A) of the Income Tax Assessment Act 1936 applied just before the start of the 1998‑99 income year must keep the records referred to in that subsection, and retain them until the end of 30 June 2002.
(2) A superannuation fund to which former subsection 160ZZU(6B) of the Income Tax Assessment Act 1936 applied just before the start of the 1998‑99 income year in relation to a CGT asset must keep the records referred to in that subsection for the asset, and retain them until the end of 5 years after CGT event A1, B1, C1, C2, G1 or G3 happens in relation to the asset.
Note: The full list of CGT events is in section 104‑5 of the Income Tax Assessment Act 1997.
Penalty: 30 penalty units.
(3) Subsection (1) or (2) does not require a fund to retain records if the Commissioner notifies the fund that the retention of the records is not required.
Part 3‑3—Capital gains and losses: special topics
Division 124—Replacement‑asset roll‑overs
Table of Subdivisions
124‑C Statutory licences
124‑I Change of incorporation
Subdivision 124‑C—Statutory licences
Table of sections
124‑140 New statutory licence—ASGE licence etc.
124‑141 ASGE licence etc.—cost base of ineligible part
124‑142 ASGE licence etc.—cost base of aquifer access licence etc.
124‑140 New statutory licence—ASGE licence etc.
(1) Sections 124‑141 and 124‑142 apply if:
(a) there are one or more roll‑overs under section 124‑140 of the Income Tax Assessment Act 1997 where:
(i) your ownership of one or more statutory licences (each of which is an original licence) ends, resulting in CGT event C2 happening to the licence (or to each of the licences as part of an arrangement); and
(ii) you are issued one or more new licences (each of which is a new licence) for the original licence (or original licences); and
(b) if there was only one original licence—that licence is covered under subsection (2); and
(c) if there was more than one original licence—at least one of the original licences was covered under subsection (2); and
(d) if there is only one new licence—that licence is covered under subsection (3); and
(e) if there is more than one new licence—only one of the new licences is covered under subsection (3); and
(f) the original licence (or at least one of the original licences) has an ineligible part (as described in section 124‑150 of the Income Tax Assessment Act 1997).
(2) A licence is covered under this subsection if it is:
(a) a bore licence issued under the Water Act 1912 of New South Wales; or
(b) a licence of a kind specified in the regulations.
(3) A licence is covered under this subsection if it is:
(a) an aquifer access licence under the Water Management Act 2000 of New South Wales issued in accordance with the New South Wales Achieving Sustainable Groundwater Entitlements program (the ASGE program); or
(b) a licence of a kind specified in the regulations.
124‑141 ASGE licence etc.—cost base of ineligible part
(1) For an original licence that has an ineligible part, the cost base of the ineligible part is the cost base of the original licence multiplied by the amount worked out under the formula:
where:
total ineligible proceeds is the total of the ineligible proceeds (as described in section 124‑150 of the Income Tax Assessment Act 1997) in relation to all of the original licences that have an ineligible part.
value of new licence is:
(a) if the new licence is an aquifer access licence mentioned in paragraph 124‑40(3)(a)—the 2002 value assigned under the ASGE program to the new licence; or
(b) otherwise—the value of the new licence worked out in accordance with the regulations.
(2) The regulations may specify one or more ways of working out the value of a licence (other than an aquifer access licence mentioned in paragraph 124‑40(3)(a)) for the purposes of this section.
(3) For an original licence that has an ineligible part, the reduced cost base of the ineligible part is the reduced cost base of the original licence multiplied by the amount worked under the formula set out in subsection (1).
124‑142 ASGE licence etc.—cost base of aquifer access licence etc.
(1) The first element of the cost base and reduced cost base of the new licence that is covered under subsection 124‑140(3) is the total of the cost bases of the original licences.
Note: For the purposes of this section, the cost base of each original licence that has an ineligible part is reduced in accordance with subsection 124‑150(4) of the Income Tax Assessment Act 1997.
(2) The cost base and reduced cost base of any new licence that is not covered under subsection 124‑140(3) is nil.
(3) Subsections (4) and (5) apply if:
(a) there was more than one original licence; and
(b) some of the original licences were acquired before 20 September 1985; and
(c) subsection 124‑165(2) of the Income Tax Assessment Act 1997 applies in relation to the new licence that is covered under subsection 124‑140(3) (splitting that licence into 2 separate CGT assets).
(4) For the purposes of subsection (2), treat the asset that is taken under paragraph 124‑165(2)(a) of that Act to have been acquired on or after 20 September 1985 as a new licence that is covered under subsection 124‑140(3) of this Act.
(5) Work out the first element of the cost base and reduced cost base of that asset in accordance with subsection 124‑165(3) of that Act.
Subdivision 124‑I—Change of incorporation
Table of sections
124‑510 Application of Subdivision 124‑I of the Income Tax Assessment Act 1997
124‑510 Application of Subdivision 124‑I of the Income Tax Assessment Act 1997
Subdivision 124‑I of the Income Tax Assessment Act 1997, as amended by Schedule 2 to the Tax Laws Amendment (2011 Measures No. 9) Act 2012, applies to CGT events happening after 7.30 pm (by legal time in the Australian Capital Territory) on 11 May 2010.
Division 125—Demerger relief
Table of Subdivisions
125‑B Consequences for owners of interests
Subdivision 125‑B—Consequences for owners of interests
Table of sections
125‑75 Employee share schemes
125‑75 Employee share schemes
Despite the amendment of section 125‑75 of the Income Tax Assessment Act 1997 made by Schedule 1 to the Tax Laws Amendment (2009 Budget Measures No. 2) Act 2009, subsection (1) of that section continues to apply, from the commencement of that Schedule, to each ownership interest that it applied to just before that commencement.
Division 126—Roll‑overs
Table of Subdivisions
126‑A Merger of qualifying superannuation funds
126‑B Transfer of life insurance business
Subdivision 126‑A—Merger of qualifying superannuation funds
Table of sections
126‑100 Merger of qualifying superannuation funds
126‑100 Merger of qualifying superannuation funds
(1) This section applies to a CGT asset of a superannuation fund (the transferee) if:
(a) the transferee acquired the asset from another superannuation fund in circumstances to which former section 160ZZPI of the Income Tax Assessment Act 1936 applied; and
(b) the transferee owned the asset just before the start of the 1998‑99 income year; and
(c) CGT event A1, B1, C1, C2, G1 or G3 happens in relation to the asset in that income year or a later one.
Note: The full list of CGT events is in section 104‑5 of the Income Tax Assessment Act 1997.
(2) The first element of the cost base of the asset in the hands of the transferee (at the time the transferee acquired the asset) is the asset’s cost base (in the hands of the other fund) at that time.
(3) The reduced cost base of the asset in the hands of the transferee is worked out similarly.
Subdivision 126‑B—Transfer of life insurance business
Table of sections
126‑150 Roll‑over on transfer of life insurance business
126‑160 Effects of roll‑over
126‑165 References to Subdivision 126‑B of the Income Tax Assessment Act 1997
126‑150 Roll‑over on transfer of life insurance business
(1) There may be a roll‑over if:
(a) a CGT event happens because all or part of the life insurance business of a life insurance company (the originating company) is transferred to another life insurance company (the recipient company):
(i) in accordance with a scheme confirmed by the Federal Court of Australia under Part 9 of the Life Insurance Act 1995; or
(ii) under the Financial Sector (Transfers of Business) Act 1999; and
(b) the originating company and the recipient company were members of the same wholly‑owned group just before the transfer; and
(c) one of these happens:
(i) a CGT asset (the original asset) of the originating company becomes an asset of the recipient company; or
(ii) a CGT asset of the originating company ends and the recipient company acquires an equivalent replacement asset; or
(iii) the originating company creates a CGT asset in the recipient company; and
(d) the transfer takes place:
(i) before 30 June 2004; or
(ii) if the originating company and the recipient company are members of the same consolidated group or consolidatable group and the head company of that group has a substituted accounting period—before the end of the head company’s income year in which 30 June 2004 occurs.
(2) The CGT asset involved (the roll‑over asset) must not be trading stock of the recipient company just after the time of the transfer.
(3) If:
(a) the roll‑over asset is a right or convertible interest referred to in Division 130, or an option referred to in Division 134, of the Income Tax Assessment Act 1997 or an exchangeable interest; and
(b) the recipient company acquires another CGT asset by exercising the right or option or by converting the convertible interest or in exchange for the disposal or redemption of the exchangeable interest;
the other asset cannot become trading stock of the recipient company just after the recipient company acquired it.
126‑160 Effects of roll‑over
(1) A capital gain or capital loss the originating company makes from the CGT event is disregarded.
(2) The first element of the cost base of the original asset or the replacement asset for the recipient company is the cost base of the original asset for the originating company just before the time of the CGT event.
(3) The first element of the reduced cost base of the original asset or the replacement asset for the recipient company is worked out similarly.
(4) For a case where the originating company creates a CGT asset in the recipient company, the first element of the asset’s cost base (in the hands of the recipient company) is the amount applicable under this table. The first element of its reduced cost base is worked out similarly.
Creating a CGT asset |
CGT event number | Applicable amount |
D1 | the incidental costs the originating company incurred that relate to the CGT event |
D2 | the expenditure the originating company incurred to grant the option |
D3 | the expenditure the originating company incurred to grant the right |
F1 | the expenditure the originating company incurred on the grant, renewal or extension of the lease |
The expenditure can include giving property: see section 103‑5 of the Income Tax Assessment Act 1997.
(5) If the originating company acquired the original asset before 20 September 1985, the recipient company is taken to have acquired the original asset or the replacement asset before that day.
126‑165 References to Subdivision 126‑B of the Income Tax Assessment Act 1997
A reference in an Act to a roll‑over under Subdivision 126‑B of the Income Tax Assessment Act 1997 includes a reference to a roll‑over under this Subdivision.
Example: Examples of the operation of this provision include:
(a) CGT event J1 may happen if the recipient company stops being a 100% subsidiary of a member of a company group after a roll‑over under this Subdivision; and
(c) an allocable cost amount may be affected under section 705‑93 because of a roll‑over under this Subdivision.
Division 128—Effect of death
Table of sections
128‑15 Effect on the legal personal representative or beneficiary
128‑15 Effect on the legal personal representative or beneficiary
The rule in item 3 in the table in subsection 128‑15(4) of the Income Tax Assessment Act 1997 (about a dwelling that was your main residence just before you died and was not being used for the purpose of producing assessable income) does not apply to a dwelling that devolved to your legal personal representative, or passed to a beneficiary in your estate, on or before 7.30 pm, by legal time in the Australian Capital Territory, on 20 August 1996.
Division 130—Investments
Table of Subdivisions
130‑A Bonus shares and units
130‑B Rights
130‑C Convertible notes
Subdivision 130‑A—Bonus shares and units
Table of sections
130‑20 Issue of bonus shares or units
130‑20 Issue of bonus shares or units
(1) This section modifies some of the rules in section 130‑20 of the Income Tax Assessment Act 1997 if:
(a) you own shares in a company or units in a unit trust (the original equities); and
(b) on or before the day specified in subsection (2) or (3), the company issues other shares, or the trustee issues other units, (the bonus equities) to you because it owes an amount to you in relation to the original equities.
(2) If the bonus equities are shares and they were issued on or before 30 June 1987:
(a) subsection 130‑20(2) of the Income Tax Assessment Act 1997 does not apply to you; and
(b) you work out the cost base and reduced cost base of the bonus equities under subsection 130‑20(3) of that Act regardless of whether any part of the amount owed to you by the company is a dividend.
(3) The rule in item 2 of the table in subsection 130‑20(3) of the Income Tax Assessment Act 1997 does not apply if the bonus equities were issued on or before 1 pm, by legal time in the Australian Capital Territory, on 10 December 1986 and you were required to pay or give something for them. Instead, you are taken to have acquired the bonus equities when you acquired the original equities.
Subdivision 130‑B—Rights
Table of sections
130‑40 Exercise of rights
130‑40 Exercise of rights
(1) The modifications in section 130‑40 of the Income Tax Assessment Act 1997 apply to you for rights (issued to you by a company before 16 August 1989) to acquire shares, or options to acquire shares, in that company, only if you were a shareholder of that company.
(2) The modifications in section 130‑40 of the Income Tax Assessment Act 1997 apply to you for rights (issued to you by a company after 15 August 1989 and before the start of the 1993‑94 income year) to acquire shares, or options to acquire shares in the company because you were a shareholder of another company, only if the companies were members of the same wholly‑owned group for the whole of the income year in which the issue occurred.
(3) The modification in item 3 of the table in section 130‑40 of the Income Tax Assessment Act 1997 applies also to your exercise of rights (that you acquired before 20 September 1985) to acquire shares, or options to acquire shares, in a company.
Subdivision 130‑C—Convertible notes
Table of sections
130‑60 Shares or units acquired by converting a convertible note
130‑60 Shares or units acquired by converting a convertible note
(1) The modification in item 1 of the table in subsection 130‑60(1) of the Income Tax Assessment Act 1997 does not apply to shares or units in a unit trust you acquire by converting a convertible note (that is a traditional security) that you acquired after 10 May 1989 and before 16 August 1989. Instead, the first element of the cost base and reduced cost base of the shares or units is the sum of:
(a) what you paid or gave to acquire the note; and
(b) any amount you paid in relation to the conversion;
if that sum is more than the market value of the shares or units (at the time of conversion).
(2) The modification in item 2 of the table in subsection 130‑60(1) of the Income Tax Assessment Act 1997 does not apply to shares you acquire by converting a convertible note (that is not a traditional security) that you acquired before 20 September 1985 where you paid or gave something in relation to the conversion. Instead, the first element of the cost base and reduced cost base of the shares is the sum of:
(a) the market value of the note at the time of the conversion; and
(b) what you paid or gave in relation to the conversion.
(3) Subsection 130‑60(2) of the Income Tax Assessment Act 1997 does not apply to the acquisition of shares by the conversion of a convertible note that you acquired before 20 September 1985 if you did not pay or give anything in relation to the conversion. Instead, you are taken to have acquired them when you acquired the convertible note.
Division 134—Options
Table of sections
134‑1 Exercise of options
134‑1 Exercise of options
(1) The modification in item 1 in the table in subsection 134‑1(1) of the Income Tax Assessment Act 1997 does not apply to an option (that was granted before 20 September 1985 and exercised after that day) that binds the grantor to create (including grant or issue) or dispose of a CGT asset. Instead, the first element of the cost base and reduced cost base of the CGT asset acquired by the grantee by exercising the option includes the market value of the option when it was exercised.
(2) This section does not apply to an option if:
(a) it has been renewed or extended; and
(b) the last renewal or extension occurred on or after 20 September 1985.
Division 136—Foreign residents
Table of Subdivisions
136‑A Making a capital gain or loss
Subdivision 136‑A—Making a capital gain or loss
Table of sections
136‑25 When an asset is taxable Australian property
136‑25 When an asset is taxable Australian property
A CGT asset a company owns is taxable Australian property if:
(a) the company acquired the asset after 28 January 1988 and on or before 25 May 1988; and
(b) it acquired the asset as a result of a disposal (for the purposes of former Part IIIA of the Income Tax Assessment Act 1936) for which there was a roll‑over under former section 160ZZN or 160ZZO of that Act; and
(c) that disposal was by:
(i) an entity that was not a trustee, and not a resident of Australia for the purposes of that Act; or
(ii) an entity that was a trustee of a trust that was not a resident trust estate, or a resident unit trust, for the purposes of that Act.
Division 137—Granny flat arrangements
Table of Subdivisions
137‑A—Granny flat arrangements
Subdivision 137‑A—Granny flat arrangements
Table of sections
Operative provisions
137‑10 Applicable CGT events
Operative provisions
137‑10 Applicable CGT events
Division 137 of the Income Tax Assessment Act 1997 applies in relation to events:
(a) that happen on or after the commencement of that Division; and
(b) that, apart from that Division, would be CGT events;
(whether the arrangements to which the events relate were entered into before, on or after that commencement).
Division 140—Share value shifting
Table of Subdivisions
140‑A When is there share value shifting?
Subdivision 140‑A—When is there share value shifting?
Table of sections
140‑7 Pre‑1994 share value shifts irrelevant
140‑15 Off‑market buy backs
140‑7 Pre‑1994 share value shifts irrelevant
You make adjustments to the cost base and reduced cost base of shares under Division 140 of the Income Tax Assessment Act 1997 only in relation to schemes where the decrease in market value and increase in market value occur after 12 noon, by legal time in the Australian Capital Territory, on 12 January 1994.
140‑15 Off‑market buy backs
(8) A share value shift is disregarded under subsection 140‑15(8) of the Income Tax Assessment Act 1997 only if:
(a) the company concerned buys back the shares after 7.30 pm, by legal time in the Australian Capital Territory, on 9 May 1995; and
(b) the buy back is not done under an arrangement that is an excluded transitional arrangement within the meaning of subitem 12(2) of Schedule 1 of the Taxation Laws Amendment Act (No 1) 1996.
Division 149—When an asset stops being a pre‑CGT asset
Table of sections
149‑5 Assets that stopped being pre‑CGT assets under old law
149‑5 Assets that stopped being pre‑CGT assets under old law
(1) This section applies to a CGT asset that:
(a) an entity last acquired before 20 September 1985; and
(b) the entity owned just before the start of the 1998‑99 income year; and
(c) the entity was taken to have acquired on a day (the acquisition day) on or after 20 September 1985 under Division 20 of former Part IIIA of the Income Tax Assessment Act 1936.
(2) In applying Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997 to the entity:
(a) the entity is taken to have acquired the asset on the acquisition day; and
(b) the first element of the cost base and reduced cost base of the asset on the acquisition day is the amount for which the entity is taken to have acquired it under Division 20 of former Part IIIA of the Income Tax Assessment Act 1936.
Division 152—Small business relief
Table of sections
152‑5 Small business roll‑over chosen but no capital gain returned
152‑10 Small business roll‑over not chosen and time remains to acquire a replacement asset
152‑15 Amendment of assessments
152‑5 Small business roll‑over chosen but no capital gain returned
(1) This section applies if:
(a) you chose a roll‑over under Subdivision 152‑E of the Income Tax Assessment Act 1997 (or under former Division 123 of that Act) for a capital gain you made for an income year from a CGT event that happened in relation to a CGT asset before the commencement of this section; and
(b) you did not include the capital gain in working out your net capital gain for that year; and
(c) assuming that you had acquired a replacement asset before the CGT event, you would have been entitled to choose that roll‑over.
(2) The capital gain is disregarded for the purposes of the Income Tax Assessment Act 1997.
(3) If you acquired a replacement asset within the period (the replacement asset period) ending 2 years after the last CGT event in the income year for which you obtained the roll‑over but the total of the first and second elements of the cost base of that asset is less than the amount of the capital gain that would, apart from this subsection, be disregarded, the amount to be disregarded is that total.
(4) However, if you do not acquire a replacement asset within the replacement asset period, that Act applies to you as if you had never chosen the roll‑over, and the capital gain is not disregarded.
(5) The Commissioner may extend the replacement asset period.
152‑10 Small business roll‑over not chosen and time remains to acquire a replacement asset
(1) This section applies if:
(a) you made a capital gain for an income year from a CGT event that happened before the commencement of this section; and
(b) you included the capital gain in working out your net capital gain for that year; and
(c) at the commencement of this section, you have not acquired a replacement asset but the replacement asset period had not expired; and
(d) assuming that you had acquired a replacement asset before the CGT event, you would have been entitled to choose a roll‑over under Subdivision 152‑E of that Act.
(2) The capital gain is disregarded for the purposes of the Income Tax Assessment Act 1997.
(3) If you acquired a replacement asset within the replacement asset period but the total of the first and second elements of the cost base of that asset is less than the amount of the capital gain that would, apart from this subsection, be disregarded, the amount to be disregarded is that total.
(4) However, if you do not acquire a replacement asset within the replacement asset period, that Act applies to you as if you had never chosen the roll‑over, and the capital gain is not disregarded.
(5) The Commissioner may extend the replacement asset period.
152‑15 Amendment of assessments
Section 170 of the Income Tax Assessment Act 1936 does not prevent the amendment of an assessment made before the commencement of this section at any time in the period of 4 years starting at that commencement for the purpose of giving effect to this Division.
Part 3‑5—Corporate taxpayers and corporate distributions
Division 165—Income tax consequences of changing ownership or control of a company
Table of Subdivisions
165‑CA Applying net capital losses of earlier income years
165‑CB Working out the net capital gain and the net capital loss for the income year of the change
165‑CC Change of ownership or control of company that has an unrealised net loss
165‑CD Reductions after alterations in ownership or control of loss company
165‑C Deducting bad debts
Subdivision 165‑CA—Applying net capital losses of earlier income years
Table of sections
165‑95 Application of Subdivision 165‑CA of the Income Tax Assessment Act 1997
165‑95 Application of Subdivision 165‑CA of the Income Tax Assessment Act 1997
Subdivision 165‑CA of the Income Tax Assessment Act 1997 (about companies applying net capital losses of earlier income years) applies to assessments for the 1998‑99 income year and later income years.
Subdivision 165‑CB—Working out the net capital gain and the net capital loss for the income year of the change
Table of sections
165‑105 Application of Subdivision 165‑CB of the Income Tax Assessment Act 1997
165‑105 Application of Subdivision 165‑CB of the Income Tax Assessment Act 1997
Subdivision 165‑CB of the Income Tax Assessment Act 1997 (about companies working out the net capital gain and the net capital loss for the income year of the change) applies to assessments for the 1998‑99 income year and later income years.
Subdivision 165‑CC—Change of ownership or control of company that has an unrealised net loss
Table of sections
165‑115E Choice to use global method to work out unrealised net loss
165‑115E Choice to use global method to work out unrealised net loss
A choice under section 165‑115E of the Income Tax Assessment Act 1997 to use the global method of working out whether a company has an unrealised net loss at a particular time must be made within 6 months after the day on which the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002 received the Royal Assent if:
(a) that time is before that day; and
(b) subsection 165‑115E(4) of that Act would otherwise require the choice to be made before the end of those 6 months.
Subdivision 165‑CD—Reductions after alterations in ownership or control of loss company
Table of sections
165‑115U Choice to use global method to work out adjusted unrealised loss
165‑115ZC When certain notices to be given
165‑115ZD Adjustment (or further adjustment) for interest realised at a loss after global method has been used
165‑115U Choice to use global method to work out adjusted unrealised loss
A choice under section 165‑115U of the Income Tax Assessment Act 1997 to use the global method of working out whether a company has an adjusted unrealised loss at a particular time must be made within 6 months after the day on which the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002 received the Royal Assent if:
(a) that time is before that day; and
(b) subsection 165‑115U(1D) of that Act would otherwise require the choice to be made before the end of those 6 months.
165‑115ZC When certain notices to be given
(1) A notice under subsection 165‑115ZC(4) or (5) of the Income Tax Assessment Act 1997 must be given within 6 months after the day on which the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002 received the Royal Assent if the alteration time is before that day.
(2) If, because of amendments made by Schedule 14 to the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002, a notice already given under subsection 165‑115ZC(4) or (5) of the Income Tax Assessment Act 1997 before the day referred to in subsection (1) of this section no longer complies with section 165‑115ZC of the Income Tax Assessment Act 1997, the entity required to give the notice may comply with that section 165‑115ZC by giving a further notice.
(3) The further notice:
(a) must vary the notice referred to in subsection (2) in such a way (which may include setting out additional information) that the notice as varied complies with section 165‑115ZC of the Income Tax Assessment Act 1997 as affected by the amendments; and
(b) must be given within the 6 months referred to in subsection (1) of this section, or within a further period allowed by the Commissioner; and
(c) must otherwise be given in accordance with that section.
Special rules for consolidatable groups and potential MEC groups
(4) Subsections (5) and (6) have effect if:
(a) the alteration time mentioned in section 165‑115ZC of the Income Tax Assessment Act 1997 is after 10 November 1999 and before 1 July 2004; and
(b) apart from this section, subsection 165‑115ZC(4) or (5) of that Act would require an entity (the notifying entity) to give a notice to another entity (the receiving entity) in relation to the alteration time; and
(c) just before the alteration time, the notifying entity and the receiving entity were both members of the same consolidatable group or potential MEC group.
(5) Subsections 165‑115ZC(4) and (5) of the Income Tax Assessment Act 1997 do not apply to the notifying entity if both it and the receiving entity became members of the same consolidated group or MEC group before 1 July 2004.
(6) Even if subsection (5) does not apply, the notifying entity is not required to give the notice to the receiving entity before the end of 6 months after the commencement of this subsection.
(7) Subsections (1) and (3) have effect subject to subsections (5) and (6).
165‑115ZD Adjustment (or further adjustment) for interest realised at a loss after global method has been used
(1) This section affects how sections 165‑115ZA and 165‑115ZB of the Income Tax Assessment Act 1997 apply to an interest (the equity) in, or a debt owed by, a company if apart from this section, a loss (the realised loss):
(a) would be realised for income tax purposes by a realisation event that happens to the equity or debt; or
(b) would be so realised but for Subdivision 170‑D of that Act (which defers realisation of capital losses and deductions);
and the company chose to use the global method of working out whether it had an adjusted unrealised loss at the last alteration time:
(c) that happened for the company, before the realisation event; and
(d) immediately before which the equity or debt was, or was part of:
(i) if the company was a loss company at that alteration time—a relevant equity interest, or a relevant debt interest, that an entity had in the company; or
(ii) otherwise—what would have been such an interest if the company had been a loss company at that alteration time;
and these conditions are satisfied:
(e) that last alteration time is before the day on which the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002 received the Royal Assent; and
(f) the entity that owns the equity or debt immediately before the realisation event chooses to apply this section to the equity or debt, in relation to that last alteration time, instead of section 165‑115ZD of the Income Tax Assessment Act 1997; and
(g) the choice is made on or before the latest of these:
(i) the last day of the period of 6 months after the day referred to in paragraph (c) of this subsection;
(ii) the day on which the entity lodges its income tax return for the income year in which the realisation event occurred;
(iii) such later day as the Commissioner allows.
If the entity makes that choice, this section applies accordingly instead of that section.
(2) In addition to any application to the equity or debt, in relation to that last alteration time, that sections 165‑115ZA and 165‑115ZB of the Income Tax Assessment Act 1997 have apart from this section, those sections apply (and are taken always to have applied) to the equity or debt, in relation to that last alteration time, as if:
(a) the company had an adjusted unrealised loss at that time equal to the realised loss (see subsection (1) or (5), as appropriate, of this section) of this section, except so much of the loss as it is reasonable to conclude is attributable to none of these:
(i) a notional capital loss, or a notional revenue loss, that the company has at that last alteration time in respect of a CGT asset;
(ii) a trading stock decrease in relation to that time for a CGT asset that was trading stock of the company at that time; and
(b) the company were therefore a loss company at that time; and
(c) that adjusted unrealised loss were the company’s overall loss at that time.
(3) For the purposes of how sections 165‑115ZA and 165‑115ZB of the Income Tax Assessment Act 1997 apply because of this section, the adjustment amount under section 165‑115ZB of that Act is to be worked out and applied in accordance with subsection 165‑115ZB(6) (the non‑formula method) of that Act.
(4) To avoid doubt:
(a) a notice need not be given under section 165‑115ZC of the Income Tax Assessment Act 1997 because of this section; and
(b) this section does not affect the requirements that apply to a notice that otherwise must be given under that section.
(5) If the equity or debt is a revenue asset at the time of the realisation event, subsection (2) applies on the basis that the realised loss is the total of:
(a) the loss (if any) realised for income tax purposes by the realisation event happening to the equity or debt in its character as a CGT asset; and
(b) the loss (if any) realised for income tax purposes by the realisation event happening to the equity or debt in its character as a revenue asset.
Subdivision 165‑C—Deducting bad debts
Table of sections
165‑135 Application of Subdivision 165‑C of the Income Tax Assessment Act 1997
165‑135 Application of Subdivision 165‑C of the Income Tax Assessment Act 1997
Subdivision 165‑C of the Income Tax Assessment Act 1997 (about companies deducting bad debts) applies to assessments for the 1998‑1999 income year and later income years.
Division 166—Income tax consequences of changing ownership or control of a listed public company
Table of Subdivisions
166‑C Deducting bad debts
Subdivision 166‑C—Deducting bad debts
Table of sections
166‑40 Application of Subdivision 166‑C of the Income Tax Assessment Act 1997
166‑40 Application of Subdivision 166‑C of the Income Tax Assessment Act 1997
Subdivision 166‑C of the Income Tax Assessment Act 1997 (about listed public companies deducting bad debts) applies to assessments for the 1998‑1999 income year and later income years.
Division 167
